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Investors often seek out "dividend aristocrats" for their superior returns, but among this group there's an even higher class: dividend kings.
Dividend aristocrats are stocks that have increased their dividend annually for 25 years straight. Dividend kings are stocks that have increased their dividend annually for 50 years straight.
And dividend stocks aren't just for income investors. History has shown that dividend-paying stocks deliver the highest total returns, especially those that increase their dividend every year.
The true value of owning dividend aristocrats becomes more pronounced over time.
Take a look this chart.
It compares the 28-year growth of a hypothetical $100 investment in four types of companies: Those that grow their dividends, those that simply pay a dividend, those that don't pay a dividend, and those that cut their dividends.
The results are eye-opening…
Why Investors Love Dividend Aristocrats
The contrast between companies that pay a dividend and those that don't is stark, with the dividend payers delivering triple the return of the non-payers. The dividend growers fared even better, besting the payers by about 40%.
The dividend kings, as you would expect, perform at the upper end of the range. Sure Dividend, which identified the 18 dividend aristocrats that qualify as kings, also calculated their 25-year return versus the Standard & Poor's 500.
A $100 investment in the S&P 500 Index in 1991 would have been worth $619 at the end of 2015. But a $100 investment in the 18 dividend kings – rebalanced each year – would have been worth a startling $2,667.
The reason dividend aristocrats (and especially the dividend kings) do so well is that only the healthiest, most stable companies can raise their payouts year after year after year.
"A company must have an extremely durable competitive advantage to pay increasing dividends for five consecutive decades," Sure Dividend founder Ben Reynolds observed in his dividend kings blog post.
Here's a closer look at the companies that have achieved dividend aristocrat status two times over…
Meet the Dividend Kings
Presented in alphabetical order:
- American States Water Co. (NYSE: AWR)
Years of Dividend Increases: 61
10-Year Annualized Total Return: 12.1%
American States is a water utility based in California with a market cap of $1.5 billion. The dividend yield is 2.23%. AWR trades at about $40. - Cincinnati Financial Corp. (Nasdaq: CINF)
Years of Dividend Increases: 56
10-Year Annualized Total Return: 7.8%
Cincinnati Financial is an insurance holding company with operations in more than 40 states. It has a market cap of $11.42 billion. The dividend yield is 2.76%. CINF trades at about $69.50. - Colgate-Palmolive (NYSE: CL)
Years of Dividend Increases: 54
10-Year Annualized Total Return: 10.8%
Colgate-Palmolive is a global company that makes many common household products. It has a market cap of $64.25 billion. The dividend yield is 2.17%. CL trades at about $72. - Dover Corp. (NYSE: DOV)
Years of Dividend Increases: 60
10-Year Annualized Total Return: 7.0%
Dover is a conglomerate with four major segments: energy, engineered systems, fluids, and refrigeration and food equipment. It has a market cap of $10.7 billion. The dividend yield is 2.43%. DOV trades at about $69. - Emerson Electric Co. (NYSE: EMR)
Years of Dividend Increases: 58
10-Year Annualized Total Return: 3.9%
Emerson Electric is a multinational company that primarily manufactures electrical and other industrial equipment. It has a market cap of $34.46 billion. The dividend yield is 3.56%. EMR trades at about $53.50. - Farmers & Merchants Bancorp (NYSE: FMCB)
Years of Dividend Increases: 50
10-Year Annualized Total Return: 4.2%
Farmers & Merchants Bancorp is a California-based regional bank that serves small- to medium-sized businesses as well as consumers. Its market cap is $507 million. The dividend yield is 2.05%. FMCB trades at about $640, but volume is very light. - Genuine Parts Co. (NYSE: GPC)
Years of Dividend Increases: 60
10-Year Annualized Total Return: 10.5%
Genuine Parts distributes auto parts and industrial replacement parts, as well as electrical materials and office products. It has a market cap of $14.43 billion. The dividend yield is 2.71%. GPC trades at about $97. - Hormel Foods Corp. (NYSE: HRL)
Years of Dividend Increases: 50
10-Year Annualized Total Return: 19.6%
Hormel makes food and meat products under more than 30 brands. Its market cap is $18.24 billion. The dividend yield is 1.70%. HRL trades at about $34. - Johnson & Johnson (NYSE: JNJ)
Years of Dividend Increases: 53
10-Year Annualized Total Return: 8.4%
Johnson & Johnson is a multinational consumer products company with a focus on healthcare and pharmaceuticals. It has a market cap of $319 billion. The dividend yield is 2.77%. JNJ trades at about $116. - The Coca-Cola Co. (NYSE: KO)
Years of Dividend Increases: 54
10-Year Annualized Total Return: 9.8%
Coca-Cola is a global beverage company that owns or licenses more than 500 brands. It has a market cap of $197.55 billion. Its dividend yield is 3.09%. KO trades at about $45.50. - Lancaster Colony Corp. (Nasdaq: LANC)
Years of Dividend Increases: 53
10-Year Annualized Total Return: 15.3%
Lancaster Colony makes specialty foods, such as Sister Schubert's frozen rolls and Marzetti dressing. Its market cap is $3.43 billion. The dividend yield is 1.62%. LANC trades at about $123.50. - Lowe's Companies Inc. (NYSE: LOW)
Years of Dividend Increases: 53
10-Year Annualized Total Return: 12.3%
Lowe's operates a chain of big-box home improvement stores. It has a market cap of $69 billion. The dividend yield is 1.42%. LOW trades at about $78.50. - 3M Co. (NYSE: MMM)
Years of Dividend Increases: 58
10-Year Annualized Total Return: 10.4%
3M is a manufacturing conglomerate with five main segments: industrial, healthcare, consumer, safety and graphics, and electronics and energy. Its market cap is $103.43 billion. The dividend yield is 2.61%. MMM trades at about $170. - Nordson Corp. (Nasdaq: NDSN)
Years of Dividend Increases: 52
10-Year Annualized Total Return: 12.5%
Nordson makes products used for dispensing coatings, adhesives, and sealants. It has a market cap of $5 billion. The dividend yield is 1.08%. NDSN trades at about $88.50. - Northwest Natural Gas Co. (NYSE: NWN)
Years of Dividend Increases: 60
10-Year Annualized Total Return: 5.9%
Northwest is a distributor of natural gas in California and the Pacific Northwest. Its market cap is $1.6 billion. The dividend yield is 3.29%. NWN trades at about $57. - Parker-Hannifin Corp. (NYSE: PH)
Years of Dividend Increases: 59
10-Year Annualized Total Return: 9.3%
Parker-Hannifin specializes in motion and control technologies, and serves mobile, industrial, and aerospace markets. Its market cap is $15.7 billion. The dividend yield is 2.16%. PH trades at about $116.50. - Procter & Gamble Co. (NYSE: PG)
Years of Dividend Increases: 60
10-Year Annualized Total Return: 5.4%
Procter & Gamble is a multinational corporation that makes personal care products under dozens of popular brands. Its market cap is $221.4 billion. The dividend yield is 3.24%. PG trades at about $83. - Vectren Corp. (NYSE: VVC)
Years of Dividend Increases: 56
10-Year Annualized Total Return: 9.6%
Vectren is a gas and electric utility with customers in Ohio and Indiana. It has a market cap of $4.27 billion. The dividend yield is 3.16%. VVC trades at about $50.50.
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About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.
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