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Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Canadian Utilities Limited (TSE:CU) shareholders for doubting their decision to hold, with the stock down 18% over a half decade.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Canadian Utilities
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, Canadian Utilities' earnings per share (EPS) dropped by 16% each year. The share price decline of 4% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Canadian Utilities' 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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Canadian Utilities' TSR for the last 5 years was 6.3%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Canadian Utilities shareholders gained a total return of 13% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 1.2% 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. For example, we've discovered 3 warning signs for Canadian Utilities that you should be aware of before investing here.