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 members of the S&P 500 have performed compared with the index itself.

Step on up, Union Pacific (NYSE: UNP).

Union Pacific shares have roughly matched the S&P 500 over the last three decades, with big outperformance in more recent years:


Source: S&P Capital IQ.

Since 1980, shares returned an average of 11% a year, compared with 11.1% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1980 would be worth $29,400 today, and naturally about the same in Union Pacific.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up about half of Union Pacific's total returns. For the S&P, dividends account for 41.5% of total returns.

Now have a look at how Union Pacific's earnings compare with S&P 500 earnings:


Source: S&P Capital IQ.

Pretty good outperformance, most of which came in recent years. Since 1995, Union Pacific's earnings per share have grown by an average of 10.8% a year, compared with 6% a year for the broader index. That's a testament to the revival of the railroad industry, which has enjoyed a new boom as gas prices rose and rail cars became more competitive with trucks.

But that earnings-growth dynamic hasn't led to superior valuations. Union Pacific has traded for an average of 19 times earnings since 1980 -- a slight discount to the 21 times earnings the S&P 500 averaged during the period.

Through it all, the company has still been a pretty average performer historically.

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