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, American States Water (NYSE:AWR).
American States Water shares have easily outperformed the S&P 500 over the past quarter-century, and with less volatility:
Since 1987, shares have returned an average of 11.1% a year, compared with 9.7% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In American States Water, it'd be worth $29,000.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up three-quarters of American States Water's total returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how American States Water earnings compare with S&P 500 earnings:
Some underperformance here, but that isn't unexpected from a utility. Since 1995, American States Water's earnings per share have increased by an average of 4.3% a year, compared with 6% a year for the broader index.
What's that meant for valuations? American States Water has traded for an average of 19 times earnings since 1987 -- just below the 24 times earnings for the broader S&P 500.
Through it all, shares have been strong performers over the past quarter-century.
Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks American States Water with a five-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add American States Water to My Watchlist.