Here’s what drives price

Westpac delivered the best shareholder returns on the benchmark NZX50 Index last quarter, followed by Z Energy, Sky TV, Spark and private hospital owner Vital Healthcare.

The NZX50’s worst performing stock in terms of shareholder returns over the quarter was travel software company Serko. That was followed by cancer diagnostics firm Pacific Edge, Ryman Healthcare, Fisher and Paykel Healthcare, and cinema software company Vista Group, based on figures from data provider Refinitiv.

During the same period, the first three months of the year, total shareholder return by the NZX50 Index fell 7.1%, compared with Serko’s 33.6% fall, and Westpac’s 16.1%t rise.

Total shareholder return, based on the company’s share price and dividend payout, is a key measure of what an investment is worth, said Chris Wilson, head of wealth solutions at Jarden.

It is important to know how your investments are performing, but daily or even quarterly share price movements are less relevant to an investor with a 30-year investment horizon than for someone who is thinking very shortterm. It is a risky strategy to try to pick how each stock will perform, which is why a diversified portfolio is so important, Wilson said.

‘‘While you may have a view on where things are going to happen and what may happen in the future, no-one has perfect foresight of those events and how they will then impact on the market.’’

Wilson said longer-term investors would look to companies that were going to continue to grow, and dividends were an important part of the investment strategy.

A dividend is a distribution of the company’s profit paid out to shareholders, who are the company’s owners. If a company does not pay dividends, investors are totally reliant for return on the value of their shares increasing for their return.

‘‘They don’t necessarily need to be paying dividends today, but there should be an expectation in the future that they will return cash flows.’’

A decision to stop paying dividends to investors could be a red flag, or it could be a sound business decision. When Covid hit in 2020, many companies temporarily cancelled dividend payouts.

‘‘If you think of what’s happening at the moment, the war in Ukraine and uncertainty around that, that obviously has an impact and that conflict has an impact on people’s views and outlooks for companies.’’

The emotional side of investing, the fear of missing out, can also be a powerful market mover.