Stocks for the Long Run: Brady Corp. 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, Brady Corporation (NYS: BRC) .


Brady Corp. shares have just about matched the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 9.9% a year, compared with 9.7% a year for the S&P (both include dividends). A thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In Brady, it would be worth $20,500.

Dividends accounted for a lot of those gains: Compounded since 1987, dividends have made up 40% of Brady's total returns. For the S&P, dividends account for 39% of total returns.

Now have a look at how Brady's earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

That's just a bit above average. Since 1995, Brady's earnings per share have increasedby an average of 7.3% a year, compared with 6% a year for the broader index.

What has that meant for valuations? Brady Corp. has traded for an average of 20 times earnings since 1987 -- just below the 24 times earnings for the broader S&P 500.

Through it all, shares have been pretty average 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 Brady Corp. with a four-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below or add Brady Corp. to My Watchlist.

The article Stocks for the Long Run: Brady Corp. 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. 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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