The Dividend Kings: Dividend Stocks With 50+ Years Of Rising Dividends by Sure Dividend
The Dividend Kings are the highest tier of dividend longevity.
Each Dividend King has paid increasing dividends for 50 or more consecutive years.
A company must have an extremely durable competitive advantage to pay increasing dividends for 5 consecutive decades.
There are currently 17 Dividend Kings. Each Dividend King satisfies the primary requirement to be a Dividend Aristocrat (25 years of consecutive dividend increases) twice over.
Dividend Kings & Performance
From 1991 through 2014, the S&P 500 Index has returned 7.9% a year. For every $1 invested in the S&P 500 at the start of 1991, an investor would have $6.23 (all returns in this article include dividends unless stated otherwise).
The worst performing of the current dividend kings returned 9.4% a year over the same time period – turning every $1 into $8.68.
Out of the 17 current Dividend Kings, all but 1 (Northwest Natural Gas) compounded investor money at 10% or more a year.
The image below shows the return of each Dividend King by year from 1991 through 2014 (^GSPC is the ticker for the S&P 500 Index):
Note: FMCB is thinly traded; price data was not available for the entire period.
Comparing the current 17 Dividend Kings to the S&P 500 would not be a fair comparison as the Dividend Kings ‘index’ includes lookback bias. Put another way, at the beginning of 1991, we didn’t know what stocks with 25 or more years of rising dividends would go on to have another 25 years of rising dividends.
In 1991 there were 38 Dividend Aristocrats. There are 17 Dividend Kings, so more than half the Dividend Aristocrats of 1991 fell off the list. Every single stock that didn’t fall off the list produced returns significantly in excess of the S&P 500.
Investing in an equal weighted basket of the 17 current Dividend Kings in 1991 (and rebalancing each year) would have generated compound returns of 14.8% a year (nearly double the S&P 500 over the same time period). Every $1 invested would have turned into $27.24.
While it’s not fair to compare performance due to look back bias, it is very informative to see that stocks that are able to continuously increase their dividend payments year after year substantially outperform the S&P 500.
Looking for businesses that have a long history of dividend increases isn’t a perfect way to predict future stocks that will increase their dividends every year, but there is considerable consistency in the Dividend Kings (and Dividend Aristocrats) Indices.
This article will take a look at each of the current Dividend Kings to determine which ones are suitable investments likely to have decades more dividend growth – and which ones aren’t as timely. The long-term dividend growth rate, current dividend yield, and long-term total return of each stock will be shown, as well as how many consecutive years of dividend increases each stock has. Stocks are analyzed in alphabetical order. You can download a spreadsheet of this data below:
Each of the Dividend Kings is analyzed below.
American States Water (AWR)
Dividend Yield: 2.2%
10 Year Total Return: 14.5% per year
10 Year Dividend Growth Rate: 8.0% per year
Consecutive Dividend Increases: 61 years
American States Water is a water utility operating in California. The company also operates an unregulated water utility service provider business serving military bases under 50 year contracts.
American States Water was founded in 1929 and has grown to a market cap of $1.5 billion.
The company generates 70% of its revenue from the highly regulated water utility business in Californian, and another 8% from its electricity utility business in California.
A total of 22% of revenues currently come from the company’s unregulated ASUS segment which serves 9 military bases under 50 year contracts. American States Water’s best growth prospects come from its ASUS segment.
The United States military is currently privatizing more of its bases’ water utility needs. Active bids are currently in process. American States Water plans to grow through winning these bids for new military bases.
American States Water company’s success is a result of sticking to what the company does best. The utility industry is low risk and offers very stable cash flows. American States Water has allocated capital from its primary utility business well. It bids on lucrative military contracts that have higher margins than its utility business. If it wins bids, it invests money to service new military bases. If the company doesn’t, it has a long history of returning cash to shareholders through both dividends and share repurchases.
Over the last decade, American States Water has compound investor returns at 14.5% a year. The company’s dividend payments have grown at about 7% a year while earnings-per-share have grown at about 10% a year. American States Water’s growth will likely continue at about the same rate as it has over the last decade.
The company currently trades for a price-to-earnings ratio of 25.7, which is somewhat excessive given the company’s solid-but-not rapid growth rate. American States Water is an excellent business that is currently trading at an inflated price-to-earnings multiple.
Fair value for the stock would be a price-to-earnings ratio of around 20; it’s 10 year historical average price-to-earnings ratio. The stock will likely be a strong buy when/if the price-to-earnings ratio falls into the teens.
Cincinnati Financial (CINF)
Dividend Yield: 3.3%
10 Year Total Return: 6.6% per year
10 Year Dividend Growth Rate: 4.1% per year
Consecutive Dividend Increases: 54 years
Cincinnati Financial is a property and casualty insurer with operations in the United States. The company was established in 1958 and has increased its dividend payments for 54 consecutive years.
The company sells insurance policies through its network of independent agents. Cincinnati Financial has grown to reach a market cap of $9.2 billion.
What sets Cincinnati Financial apart from other insurers is its large equity exposure in its insurance float. The company invests 35% of its insurance float into blue-chip stocks.
This is about twice as much exposure to equities as the industry average (excluding Berkshire Hathaway). Cincinnati Financials’ above average equity exposure helps it to perform well during bull markets, but hurts it during bear markets when equity values fall. Since equities have historically outperformed fixed income investments over long periods of time, Cincinnati Financials’ above-average exposure to equities is reasonable.
Cincinnati Financial has had below-average 10 year total returns and dividend growth. The company has struggled to maintain profitable underwriting operations over the last decade. Cincinnati Financial had underwriting losses in 2008, 2009, 2010, 2011, and 2012 – a streak of 5 consecutive years. This weak performance dampened the company’s equity portfolio gains from the recovery of the Great Recession from 2009 to today. Book value grew at just 1.5% a year over the last decade – somewhere around the rate of inflation.
On the positive side, Cincinnati Financial stock currently has a solid 3.3% dividend yield. The company currently trades for a price-to-earnings ratio of just 14.1 which is about in line with its historical average. Investors in Cincinnati Financial should not expect rapid growth going forward. If the market enters another protracted bear market, the company’s book value will decline. Other insurers with long dividend histories will likely have better returns than Cincinnati Financial over the