By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at AEW UK REIT plc (LON:AEWU), which is up 23%, over three years, soundly beating the market return of 1.2% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year , including dividends .

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for AEW UK REIT

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

AEW UK REIT was able to grow its EPS at 17% per year over three years, sending the share price higher. However, extraordinary items have impacted recent EPS numbers. The average annual share price increase of 7% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of AEW UK REIT, it has a TSR of 55% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that AEW UK REIT shareholders have received a total shareholder return of 12% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand AEW UK REIT better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for AEW UK REIT you should know about.