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, Sherwin-Williams
Sherwin-Williams shares have crushed the S&P 500 over the last quarter-century, with most of the outperformance coming in recent years:
Source: S&P Capital IQ.
Since 1987, shares have returned an average of 14.5% 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 Sherwin-Williams, it'd be worth $73,300.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up just under half of Sherwin-Williams' total returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how Sherwin-Williams earnings compare with S&P 500 earnings:
Source: S&P Capital IQ.
Again, strong outperformance. Since 1995, earnings per share have increased by an average of 8.5% per year, compared with 6% annual growth for the broader index.
What's that meant for valuations? Sherwin-Williams has traded for an average of 17 times earnings since 1987 -- below the 24 times earnings of the broader 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 Sherwin-Williams with a three-star rating (out of five). Do you disagree? Leave your thoughts in the comments section below, or add Sherwin-Williams 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. Motley Fool newsletter services have recommended buying shares of Sherwin-Williams. 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.