Stocks for the Long Run: Aqua America 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, Aqua America (NYSE: WTR  ) .

Aqua America shares have easily outperformed the S&P 500 over the last quarter-century:

Since 1987, shares have returned an average of 12.7% a year, compared with 9.7% a year for the S&P (both include dividends). That difference adds up fast. One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In Aqua America, it'd be worth $45,650. 

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 69% of Aqua America's total returns. For the S&P, dividends account for 39% of total returns.

Now have a look at how Aqua America earnings compare with S&P 500 earnings:

Pretty good outperformance. Since 1995, earnings per share have increased by an average of 7.4% per year, compared with 6% annual growth for the broader index.

What's that meant for valuations? Aqua America has traded for an average of 23 times earnings since 1987 -- close to the 24 times earnings average of the S&P 500.

Through it all, shares have been strong performers over the last quarter-century.  

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