Stocks for the Long Run: H.J. Heinz 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, H.J. Heinz (NYSE: HNZ  ) .

H.J. Heinz shares have almost exactly matched S&P 500 over the past quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 9.6% a year, compared with 9.7% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1987 would be worth $19,200 today, and, naturally, about the same in H.J. Heinz.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up about two-thirds of H.J. Heinz's total returns. For the S&P, dividends account for 39% of total returns.

Now have a look at how H.J. Heinz earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Some underperformance here. Since 1995, H.J. Heinz earnings per share have increased by an average of 2.9% a year, compared with 6% a year for the broader index.

What's that meant for valuations? H.J. Heinz has traded for an average of 22 times earnings since 1987 -- a bit below the 24 times earnings of the broader S&P 500.

Through it all, shares have been average performers over the past quarter-century.

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

Fool contributor Morgan Housel and The Motley Fool have no positions in the stocks mentioned above. Motley Fool newsletter services recommend H.J. Heinz. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 12, 2012, at 4:36 PM, BeanCounter65 wrote:

    Heinz's Balance Sheet and dividend payout ratio is not particularly confidence inspiring.

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