The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Altria Group, Inc. (NYSE:MO) has fallen short of that second goal, with a share price rise of 69% over five years, which is below the market return. But if you include dividends then the return is market-beating. On a brighter note, more newer shareholders are probably rather content with the 29% share price gain over twelve months.

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

View our latest analysis for Altria Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the last half decade, Altria Group became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Altria Group share price is up 8.9% in the last three years. In the same period, EPS is up 71% per year. This EPS growth is higher than the 2.9% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.72.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Altria Group has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Altria Group stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Altria Group the TSR over the last 5 years was 147%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Altria Group shareholders have received a total shareholder return of 40% over the last year. Of course, that includes the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Altria Group better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Altria Group (including 1 which can't be ignored) .

Of course Altria Group 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 American exchanges.

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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.