Heiwa Real Estate REIT (TSE:8966) jumps 6.8% this week, though earnings growth is still tracking behind five-year shareholder returns

Simply Wall St · 04/15 06:37

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Heiwa Real Estate REIT, Inc. (TSE:8966) share price is up 37% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 8.3% in that time.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Heiwa Real Estate REIT managed to grow its earnings per share at 6.4% a year. This EPS growth is remarkably close to the 7% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
TSE:8966 Earnings Per Share Growth April 15th 2025

This free interactive report on Heiwa Real Estate REIT's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Heiwa Real Estate REIT, it has a TSR of 72% for the last 5 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

While it's never nice to take a loss, Heiwa Real Estate REIT shareholders can take comfort that , including dividends,their trailing twelve month loss of 2.9% wasn't as bad as the market loss of around 6.9%. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Heiwa Real Estate REIT is showing 1 warning sign in our investment analysis , you should know about...

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese exchanges.