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One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the UOL Group Limited (SGX:U14) share price is up 33% in the last three years, clearly besting than the market return of around 3.9% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.9%, including dividends.
See our latest analysis for UOL Group
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 three years of share price growth, UOL Group achieved compound earnings per share growth of 15% per year. The average annual share price increase of 9.9% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on UOL Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for UOL Group the TSR over the last 3 years was 42%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that UOL Group has rewarded shareholders with a total shareholder return of 8.9% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4.9% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research UOL Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.