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Stocks for the Long Run: Duke Energy vs. the S&P 500

By Motley Fool Staff – Updated Apr 7, 2017 at 12:43PM

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A long history of returns.

Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. He says that way "you'll be buying into a wonderful industry, which in effect is all of American industry.

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, Duke Energy (NYSE: DUK).                                             

Duke Energy shares have slightly outperformed the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 10.5% 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 Duke Energy, it'd be worth $24,100.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up about 90% of Duke Energy's total returns. For the S&P, dividends account for 39% of total returns.

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

Source: S&P Capital IQ.

Some underperformance here. Since 1995, Duke Energy earnings per share have remained roughly flat, compared with 6% a year growth for the broader index.

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

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

Duke Energy Corporation Stock Quote
Duke Energy Corporation
DUK
$93.02 (-2.19%) $-2.08

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