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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Urban Logistics REIT plc (LON:SHED) shareholders have seen the share price rise 22% over three years, well in excess of the market return (13%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.8% in the last year, including dividends.
See our latest analysis for Urban Logistics REIT
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. 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, Urban Logistics REIT actually saw its earnings per share (EPS) drop 14% per year. Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
Take a more thorough look at Urban Logistics REIT's financial health with this free report on its balance sheet.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Urban Logistics REIT's TSR for the last 3 years was 39%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Urban Logistics REIT shareholders have gained 1.8% (in total) over the last year. That's including the dividend. That falls short of the 12% it has made, for shareholders, each year, over three years. If you would like to research Urban Logistics REIT in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.