Stocks for the Long Run: Schlumberger vs. the S&P 500

Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "[You'll] be buying into a wonderful industry, which in effect is all of American industry," he says.

But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how members of the S&P 500 have performed compared with the index itself.

Step on up, Schlumberger (NYSE: SLB  ) .

Schlumberger shares have actually underperformed the S&P 500 over the last three decades:

Source: S&P Capital IQ.

Since 1980, shares returned an average of 8.3% a year, compared with 11.1% a year for the S&P (both include dividends). That difference adds up fast. One thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Schlumberger, it'd be worth just $13,000.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up about half of Schlumberger's total returns. For the S&P, dividends account for 41.5% of total returns.

And have a look at how Schlumberger's earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Not bad. Since 1995, Schlumberger's earnings per share have grown by an average of 11.9% a year, compared with 6% a year for the broader index. Schlumberger's earnings power has been strong over the years; it's just had a tough time convincing the market that earnings growth should be rewarded with share returns.

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Schlumberger with a five-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Schlumberger to My Watchlist.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 14, 2012, at 12:56 PM, Taylor1234 wrote:

    Over the last 20 years, SLB has consistently and significantly outperformed the S&P. You have to go back 30 years to obtain your results. Why?

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