Stocks for the Long Run: Comcast 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, Comcast (Nasdaq: CMCSA  ) .

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

Source: S&P Capital IQ.

Since 1980, shares returned an average of 10.3% 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 Comcast, it'd be worth $23,300.

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

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

Source: S&P Capital IQ.

Earnings have outperformed the S&P, but it's been a bumpy ride. Since 1995, Comcast's earnings per share have grown by an average of 8% a year, compared with 6% a year for the broader index.

What's it all meant for valuations? Comcast has traded for an average of 48 times earnings since 1980 -- markedly higher than the 21 times earnings for the broader S&P 500. It's far different today, however. Shares currently trade for about 15 times earnings.

Through it all, shares have been slight laggards 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 Comcast with a two-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Comcast 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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