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

Investing isn't easy. Even Warren Buffett counsels that most investors should consider 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 members of the S&P 500 have performed compared with the index itself.

Step on up, ExxonMobil (NYS: XOM) .

ExxonMobil shares have simply crushed the S&P 500 over the past three decades:

Source: S&P Capital IQ.

Since 1980, shares have returned an average of 15.5% a year, compared with 11.1% a year for the S&P (both include dividends). That difference adds up fast. One thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In ExxonMobil, it'd be worth $99,900.

Dividends accounted for a lot of that gain. Compounded since 1980, dividends have made up 74.8% of ExxonMobil's total returns. For the S&P, dividends account for 41.5% of total returns.

And now have a look at how ExxonMobil's earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Again, significant outperformance. Since 1995, ExxonMobil's earnings per share have grown by an average of 12.6% a year, compared with 6% a year for the broader index. That's testament to the power of the company's scale, the wise investments of its management, and, of course, the rising price of oil.

But that earnings-growth dynamic hasn't led to higher valuations. ExxonMobil has traded for an average of 16.5 times earnings since 1980, compared with 21.3 times for the S&P.

Still, the company has been, without a doubt, an above-average performer historically.

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

At the time thisarticle was published Fool contributorMorgan Houselowns shares of ExxonMobil. Follow him on Twitter,@TMFHousel. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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