Public Companies

KKR Real Estate Finance Trust's (NYSE:KREF) investors will be pleased with their respectable 38% return over the last year

One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. KKR Real Estate Finance Trust Inc. (NYSE:KREF) has done well over the last year, with the stock price up 27% beating the market return of 25% (not including dividends). However, the stock hasn't done so well in the longer term, with the stock only up 8.0% in three years.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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.

During the last year KKR Real Estate Finance Trust grew its earnings per share (EPS) by 190%. This EPS growth is significantly higher than the 27% increase in the share price. Therefore, it seems the market isn't as excited about KKR Real Estate Finance Trust as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 10.13.

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

earnings-per-share-growthNYSE:KREF Earnings Per Share Growth October 5th 2021

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of KKR Real Estate Finance Trust's earnings, revenue and cash flow.

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. We note that for KKR Real Estate Finance Trust the TSR over the last 1 year was 38%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that KKR Real Estate Finance Trust rewarded shareholders with a total shareholder return of 38% over the last year. That includes the value of the dividend. That's better than the annualized TSR of 12% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. 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. For instance, we've identified 4 warning signs for KKR Real Estate Finance Trust (2 are a bit unpleasant) that you should be aware of.

Of course KKR Real Estate Finance Trust may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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