Stocks for the Long Run: CSX 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. He says that way "you'll be buying into a wonderful industry, which in effect is all of American industry."

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, CSX (NYSE: CSX  ) .                                                                

CSX shares have modestly outperformed the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 11.6% 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 CSX, it'd be worth $33,300.

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

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

Source: S&P Capital IQ.

Modest outperformance here, too. Since 1995, CSX earnings per share have increased by 6.7% per year, compared with 6% a year for the broader index.

What's that meant for valuations? CSX has traded for an average of 18 times earnings since 1987 -- below the 24 times earnings of the broader 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 CSX with a four-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add CSX to My Watchlist.