Stocks for the Long Run: Johnson Controls 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 individual stocks have performed against the broad S&P 500.

Step on up, Johnson Controls (NYSE: JCI  ) .

Johnson Controls shares have easily outperformed the S&P 500 over the last three decades:

Source: S&P Capital IQ.

Since 1980, shares have returned an average of 13.7% 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 Johnson Controls, it'd be worth $60,350.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up about 60% of Johnson Controls' total returns. For the S&P, dividends account for 41.5% of total returns.

Now have a look at how Johnson Controls earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

That's decent outperformance. Since 1995, earnings per share have grown by an average of 9% a year, compared with 6% annual growth for the broader index.

What's that meant for valuations? Johnson Controls has traded for an average of 18 times earnings since 1980 -- a bit below the average of 21 times earnings for the S&P 500.

Through it all, shares have been strong 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 Johnson Controls with a five-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below or add Johnson Controls to My Watchlist.