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

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 members of the S&P 500 have performed compared with the index itself.

Step on up, Deere (NYS: DE) .

Deere shares have roughly matched the S&P 500 over the last three decades:

Source: S&P Capital IQ.

Since 1980, shares returned an average of 11.2% a year, compared with 11.1% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1980 would be worth $29,400 today -- and, naturally, about the same in Deere.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up about two-thirds of Deere's total returns. For the S&P, dividends account for 41.5% of total returns.

Now have a look at how Deere earnings compared with S&P 500 earnings:

Source: S&P Capital IQ.

That's pretty nice outperformance. Since 1995, earnings per share have grown by an average of 10.2% a year, compared with 6% a year for the broader index.

What has it all meant for valuations? Deere has traded for an average of 26 times earnings since 1980 -- markedly above the 21 times earnings for the broader S&P 500.

Through it all, shares have been fairly average performers over the last three decades.

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

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

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.