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

Before you go, we thought you'd like these...
Before you go close icon

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, PPL (NYSE: PPL) .                                                                 

PPL shares have modestly outperformed the S&P 500 over the past quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 10.2% 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 PPL, it'd be worth $22,600.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up about 80% of PPL's total returns. For the S&P, dividends account for 39% of total returns.

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

Source: S&P Capital IQ.

Pretty average here. Since 1995, PPL earnings per share have increased by an average of 5.8% a year, compared with 6% a year for the broader index. 

What's that meant for valuations? PPL has traded for an average of 14 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 past quarter-century.  

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks PPL with a five-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add PPL to My Watchlist.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners