Stocks for the Long Run: Aflac 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, Aflac (NYSE: AFL  ) .

Aflac shares have simply crushed the S&P 500 over the last three decades:

Source: S&P Capital IQ.

Since 1980, shares returned an average of 19.8% a year, compared with 11.1% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Aflac, it'd be worth $322,000.

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

Now have a look at how Aflac earnings compared with S&P 500 earnings:

Source: S&P Capital IQ.

Again, solid outperformance. Since 1995, earnings per share have grown by an average of 12.1% a year, compared with 6% a year for the broader index.

What's it all meant for valuations? Not much. Aflac has traded for an average of 19 times earnings since 1980 -- close to the 21 times earnings for the broader S&P 500.

Through it all, shares have clearly been outperformers over the last three decades.  

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Aflac with a five-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Aflac 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. Motley Fool newsletter services have recommended buying shares of Aflac. 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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  • Report this Comment On July 09, 2012, at 10:58 PM, paul0220 wrote:

    Aflac (AFL) is certainly a great long term stock, but take a look at Colgate-Palmolive (CL) vs AFL over the last ten years. CL doesn't get a lot of press but it should since it's steadier growth rate over 10 years is about 135% versus about 60% for AFL.

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9/18/2014 9:31 AM
AFL $58.68 Up +0.35 +0.60%
Aflac CAPS Rating: *****

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