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, Piedmont Natural Gas (NYSE:PNY).
Piedmont Natural Gas 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 12% 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 Piedmont Natural Gas, it'd be worth $38,100.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 72% of Piedmont Natural Gas's returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how Piedmont Natural Gas earnings compare with S&P 500 earnings:
Some underperformance here, but that's not uncommon for a utility. Since 1995, Piedmont Natural Gas's earnings per share have grown by an average of 4.4% a year, compared with 6% a year for the broader index.
What's that meant for valuations? Piedmont Natural Gas has traded for an average of 17 times earnings since 1987 -- 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 Piedmont Natural Gas with a four-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add Piedmont Natural Gas to My Watchlist.