Investing in an index fund will enable you to increase your wealth over time in the stock market. But choosing above-average stocks will greatly increase your returns.
For instance, the share price of China Unicom (Hong Kong) Limited (HKG:762) has increased by 60% over the course of the past year, far outpacing the market return of about 6.3% (excluding dividends). By our standards, that’s a good performance! The stock, which has only increased 5.1% during the past three years, hasn’t performed as well over the longer term.
So let’s look into it and see if the company’s longer-term performance has been consistent with the development of the core business.
The Superinvestors of Graham-and-Doddsville is his essay. Warren Buffett explained how stock prices don’t always accurately reflect a company’s worth. We may get a sense of how investor perceptions of a company have changed over time by examining changes in profits per share (EPS) and share price over time.
In the previous year, China Unicom (Hong Kong) was able to increase EPS by 13%. Certainly, the 60% increase in the share price surpassed the EPS increase. This shows that market sentiment towards the stock has improved.
Where Do Dividends Fit In?
The distinction between total shareholder return (TSR) and share price return should be taken into account when analysing investment results. The TSR, based on the supposition that dividends are reinvested, includes the value of any spin-offs or discounted capital raisings in addition to any dividends.
The TSR perhaps provides a more complete picture of the return produced by a stock. China Unicom (Hong Kong) has a TSR of 70% over the past 12 months. That is greater than the return on its share price that we previously noted. This is partly due to the dividends it pays out!
A Different Viewpoint
It’s encouraging to see that during the past year, shareholders of China Unicom (Hong Kong) have enjoyed a total shareholder return of 70%. The dividend is included in that. That certainly outperforms the loss of around 3% annually during the previous five years.
We are a little apprehensive as a result, although the company may have changed its course. Looking at share price as a long-term proxy for company performance intrigues me much. But we must also take into account other data in order to really understand anything. As an illustration, we’ve found 1 red flag for China Unicom (Hong Kong) that you need to be aware of.
However, take note that China Unicom (Hong Kong) might not be the greatest stock to purchase. Check out this free list of intriguing firms with historical earnings growth (and growth projections for the future).
- Published By Team Hongkong Journalist