Shareholders Of Alliant Energy (NASDAQ:LNT) Must Be Happy With Their 80% Return
The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market But Alliant Energy Corporation (NASDAQ:LNT) has fallen short of that second goal, with a share price rise of 54% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 22% share price gain over twelve months.
Check out our latest analysis for Alliant Energy
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Alliant Energy achieved compound earnings per share (EPS) growth of 7.9% per year. So the EPS growth rate is rather close to the annualized share price gain of 9% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Alliant Energy's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Alliant Energy the TSR over the last 5 years was 80%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Alliant Energy shareholders are up 25% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. It is possible that returns will improve along with the business fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Alliant Energy , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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