Stocks for the Long Run: CenterPoint Energy 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, CenterPoint Energy (NYSE: CNP  ) .

CenterPoint Energy shares have underperformed the S&P 500 over the past quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 7.9% 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. In CenterPoint Energy, it'd be worth $11,300.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 95% of CenterPoint Energy's returns. For the S&P, dividends account for 39% of total returns.

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

Source: S&P Capital IQ.

Underperformance here, too. Since 1995, CenterPoint Energy's earnings per share have declined, compared with 6% a year growth for the broader index.

What's that meant for valuations? CenterPoint Energy has traded for an average of 16 times earnings since 1987 -- below the 24 times earnings for the broader S&P 500.

Through it all, shares have been disappointments 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 CenterPoint Energy with a four-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add CenterPoint Energy to My Watchlist.

There are many different ways to play the energy sector, and our analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this company before the market does. Click here to access your report -- it's totally free.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2158579, ~/Articles/ArticleHandler.aspx, 10/21/2014 4:40:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement