It's possible to achieve returns close to the market-weighted average return by buying an index fund. A talented investor can beat the market with a diversified portfolio, but even then, some stocks will under-perform. The Singapore Shipping Corporation Limited (SGX:S19) stock price is down 12% over five years, but the total shareholder return is 3.3% once you include the dividend. That's better than the market which declined 6.2% over the same time.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Singapore Shipping
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
While the share price declined over five years, Singapore Shipping actually managed to increase EPS by an average of 4.5% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
With EPS gaining and a declining share price, one would suggest the market is cooling on its view of the company. Generally speaking, though, if the company can keep growing EPS then the share price will eventually follow.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Singapore Shipping's 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Singapore Shipping's TSR for the last 5 years was 3.3%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that Singapore Shipping shareholders are down 3.8% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.2%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Singapore Shipping better, we need to consider many other factors. Even so, be aware that Singapore Shipping is showing 2 warning signs in our investment analysis , you should know about...