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, Aqua America
Aqua America shares have easily outperformed the S&P 500 over the last quarter-century:
Source: S&P Capital IQ.
Since 1987, shares have returned an average of 12.7% 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 Aqua America, it'd be worth $45,650.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 69% of Aqua America's total returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how Aqua America earnings compare with S&P 500 earnings:
Source: S&P Capital IQ.
Pretty good outperformance. Since 1995, earnings per share have increased by an average of 7.4% per year, compared with 6% annual growth for the broader index.
What's that meant for valuations? Aqua America has traded for an average of 23 times earnings since 1987 -- close to the 24 times earnings average of the 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 Aqua America with a four-star rating (out of five). Do you disagree? Leave your thoughts in the comments section below, or add Aqua America to My Watchlist.
Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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