Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the Starwood Property Trust, Inc. (NYSE:STWD) share price is up 10% in the last three years, that falls short of the market return. At least the stock price is up over the last year, albeit only by 3.9%.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years of share price growth, Starwood Property Trust actually saw its earnings per share (EPS) drop 4.3% per year. The comparison of the modestly falling earnings per share, and the relatively resilient share price, suggests the market is less cautious about the stock, these days. Ultimately, though, we don't think it can maintain share price gains without turning around the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Starwood Property Trust's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Starwood Property Trust's TSR for the last 3 years was 44%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Starwood Property Trust shareholders have received a total shareholder return of 14% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7.6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Starwood Property Trust you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
But note: Starwood Property Trust may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.