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

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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, Beam (NYS: BEAM) .


Beam shares have outperformed the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 11% 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 Beam, it would be worth $28,100.

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

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

Source: S&P Capital IQ.

Some underperformance here. Since 1995, Beam earnings per share have increased by an average of 3.8% a year, compared with 6% a year for the broader index.

What's that meant for valuations? Beam 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 Beam with a four-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add Beam to My Watchlist

The article Stocks for the Long Run: Beam vs. the S&P 500 originally appeared on Fool.com.

Motley Fool Staff has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Beam. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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