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The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But ANZ Group Holdings Limited (ASX:ANZ) has fallen short of that second goal, with a share price rise of 17% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Looking at the last year alone, the stock is up 14%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for ANZ Group Holdings
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, ANZ Group Holdings actually saw its EPS drop 0.2% per year.
With EPS falling, but a modestly increasing share price, it seems that the market was probably too pessimistic about the stock in the past. Having said that, if the EPS falls continue we'd be surprised to see a sustained increase in share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of ANZ Group Holdings, it has a TSR of 54% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that ANZ Group Holdings shareholders have received a total shareholder return of 20% over one year. That's including the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand ANZ Group Holdings better, we need to consider many other factors. For instance, we've identified 2 warning signs for ANZ Group Holdings that you should be aware of.