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By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the The Law Debenture Corporation p.l.c. (LON:LWDB) share price is up 25% in the last three years, clearly besting than the market return of around 13% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 0.9% in the last year, including dividends.

View our latest analysis for Law Debenture

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 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 three years of share price growth, Law Debenture actually saw its earnings per share (EPS) drop 5.0% per year. This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

The revenue drop of 2.6% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between Law Debenture's share price and its historic fundamental data. Further research may be required!

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

This free interactive report on Law Debenture's balance sheet strength 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Law Debenture, it has a TSR of 37% for the last 3 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 Law Debenture shareholders have received a total shareholder return of 0.9% over one year. That's including the dividend. However, the TSR over five years, coming in at 5.7% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Before forming an opinion on Law Debenture you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.