A long history of returns.

Investing isn't easy. Even Warren Buffett advises that most investors 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 that of the index. In this series, we look at how members of the S&P 500 have performed compared with the index itself.

Step on up, Johnson & Johnson (NYSE: JNJ).

Johnson & Johnson shares have simply crushed the S&P 500 over the last three decades:


Source: S&P Capital IQ.

Since 1980, shares returned an average of 14.7% a year, compared with 11.1% a year for the S&P (both include dividends). That difference adds up fast. A thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Johnson & Johnson, it would be worth $80,600.

Dividends accounted for a lot of that gain. Compounded since 1980, dividends have made up 48.5% of Johnson & Johnson's total returns. For the S&P, dividends account for 41.5% of total returns.

And now have a look at how Johnson & Johnson's earnings compare with S&P 500 earnings:


Source: S&P Capital IQ.

Again, significant outperformance. Since 1995, Johnson & Johnson's earnings per share have grown by an average of 8.9% a year, compared with 6% a year for the broader index. That's testament to the power of the company's brands, its global reach, its unique decentralization of business subsidiaries, and its center-stage position in one of the fastest-growing industries around -- health care.

That earnings-growth dynamic has also played a role in valuations. Johnson & Johnson has traded for an average of 25.4 times earnings since 1980, compared with 21.3 times for the S&P.

The company has been, without a doubt, an above-average performer historically.

The question is whether that can continue. That's where you come in. Our CAPS community currently ranks Johnson & Johnson with a five-star rating (out of five). Do you disagree with that assessment? Leave your thoughts in the comment section below or add Johnson and Johnson to My Watchlist.