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SeaWorld Entertainment (NYSE:SEAS) shareholders have earned a 32% CAGR over the last five years

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. For example, the SeaWorld Entertainment, Inc. (NYSE:SEAS) share price is up a whopping 303% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. And in the last month, the share price has gained 34%. But this could be related to good market conditions -- stocks in its market are up 14% in the last month. Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. During the five years of share price growth, SeaWorld Entertainment moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the SeaWorld Entertainment share price has gained 71% in three years. During the same period, EPS grew by 52% each year. This EPS growth is higher than the 20% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image). We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on SeaWorld Entertainment's earnings, revenue and cash flow. A Different Perspective It's nice to see that SeaWorld Entertainment shareholders have received a total shareholder return of 2.4% over the last year. However, that falls short of the 32% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 4 warning signs we've spotted with SeaWorld Entertainment . If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. The board of Stanley Black & Decker, Inc. (NYSE:SWK) has announced that it will be paying its dividend of $0.80 on the 20th of September, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns. Stanley Black & Decker's Payment Has Solid Earnings Coverage If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Stanley Black & Decker was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend. Over the next year, EPS is forecast to expand by 94.9%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward. Stanley Black & Decker Has A Solid Track Record The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was $1.64, compared to the most recent full-year payment of $3.20. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained. The Dividend's Growth Prospects Are Limited Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Stanley Black & Decker has seen earnings per share falling at 4.3% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited. In Summary Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Stanley Black & Decker is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment. Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Stanley Black & Decker (of which 1 is potentially serious!) you should know about. Is Stanley Black & Decker not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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. 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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