5 stocks with phenomenal 5-year total shareholder return

When investors look at the earnings and return that a stock can achieve, they need to look at the share price appreciation through earnings and the dividend that the company pays its shareholders. Having a stable dividend income can be like owning a bond if the dividend yield (dividend per share/share price) is decent enough.

Of the ASX 200 companies, these five have had the highest average total shareholder return (TSR) over the past five years. Most of them have increased in share price dramatically over the past year, but that doesn’t mean their ascent is done, and they still have opportunities to grow further.

Forge Group (ASX: FGE) is an engineering and development service provider for the mining and oil and gas sectors in Australasia and Africa. Its five-year annualised TSR is 83%. It has increased its earnings per share (EPS) from 8.8 cents per share to 72.96cps over the past five years for an average annual EPS growth of 52.5%. It has a 4.3% dividend yield.

Due to the downturn in the mining industry, the share price has been mostly going sideways for the past two years, but that may an opportunity for investors who know the industry and can detect when it is reviving.

Flexigroup (ASX: FXL), a credit and loan financing company that customers can use to lease or purchase household goods on credit or installment, achieved an 87% TSR. Its share price took off in June 2012, rising from $2.50 to $4.72, or 88%.  The dividend yield is 3.3% As the economy improves, and consumers have more discretionary income, sales on credit or leasing terms should rise proportionately, and that will mean more revenue for the company.

Magellan Financial Group (ASX: MFG) had a phenomenal rise in share price from its EPS growth 8.5cps to 40cps in 2013. Its TSR came in at 89%, resulting from the funds management income it gets from the three global equity funds it operates for high net worth and retail investors.

You might think that the 2013 earnings growth from $13.66 million to $66.6 million would be an outlier, and hard to repeat, but from 2010 to 2012 average annual earnings growth was 88%, when it went from $3.72 million to $13.66 million.

G8 Education (ASX: GEM) is a growing child daycare centre business that currently has over 160 daycare centres under ownership or contract, as well as 69 more in Singapore. This $934 million enterprise has quadrupled its net profits after tax (NPAT) in the last two years as it adds more daycare centres in this highly fragmented industry. Its five-year TSR is 100.3%, and since August 2012 its share price has gone from $1 to $3.11. Its dividend yield is 4.29%.

TPG Telecom (ASX: TPM), the telecommunications and internet service provider, and the fourth largest in Australia with 6.5% market share, had a TSR of 107%. NPAT was up 64% in 2013 with a net profit margin of 22%. It is yielding a dividend of 2.03%.

More consumers will be moving to faster 4G platforms, and bundling phone, mobile and internet services keeps the three income streams together. TPG has a reputation of being a fast speed ISP with unlimited downloads.

Foolish takeaway

Yes, all of these companies had incredible runs of earnings and share price,  but it’s their room to grow that must be researched and analysed to see what’s in store if you were to add them to your portfolio.

Your first few questions should be about their competition, whether their growth plans and rate of grow are sustainable, and how strong their balance sheet is. Answer those questions well for yourself, and you’ll be farther on your way to decide to buy the stock.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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