I
nvestors often struggle with making money when the market is declining. However, a closer look at Chicago Atlantic Real Estate Finance (NASDAQ:REFI) reveals that its total shareholder return has been more impressive than its share price movement over the past three years. Despite being down 11%, the company's dividend payments have contributed to a 34% total shareholder return, outperforming the market's 25% return.

    Let's examine if the company's economics are aligned with these underwhelming returns or if there is a disparity between the two. We'll start by comparing the change in earnings per share (EPS) with the share price movement. Chicago Atlantic Real Estate Finance's EPS has declined at a compound rate of 0.06% per year, which is slower than the 4% annual reduction in its share price. This suggests that the market may be disappointed with the company's performance, leading to a less favorable sentiment.

    The current P/E ratio of 7.86 reflects this negative sentiment. To gain a better understanding, let's consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates dividends and assumes they are reinvested, providing a more complete picture for dividend-paying stocks like Chicago Atlantic Real Estate Finance.

    Over the past three years, the company's TSR was 34%, largely driven by its dividend payments. While this is better than the market return of 25%, it still falls short. However, the recent TSR of 12% over the last year is a positive sign, indicating that the company may be improving. To truly assess business performance, we need to consider other factors beyond share price movement.

    It's worth noting that Chicago Atlantic Real Estate Finance has two warning signs in our investment analysis, with one being particularly concerning.