Stocks for the Long Run: Bristol-Myers Squibb 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, Bristol-Myers Squibb (NYSE: BMY  ) .

Bristol-Myers Squibb shares have moderately outperformed the S&P 500 over the last three decades:

Source: S&P Capital IQ.

Since 1980, shares returned an average of 13% 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 Bristol-Myers Squibb, it'd be worth $50,000.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up 72% of Bristol-Myers Squibb's total returns. For the S&P, dividends account for 41.5% of total returns.

Now have a look at how Bristol-Myers Squibb's earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Perhaps surprisingly, there's slight underperformance. Since 1995, Bristol-Myers Squibb's earnings per share have grown by an average of 5.6% a year, compared with 6% a year for the broader index.

But that earnings-growth dynamic doesn't seem to have affected valuations. Bristol-Myers Squibb has traded for an average of 21.5 times earnings since 1980 -- the exact same average as the S&P 500.

Through it all, the company has still been an above-average performer historically.

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