Arguably the greatest aspect of putting your money to work on Wall Street is that there are countless ways to grow your wealth. With thousands of publicly traded stocks and exchange-traded funds (ETFs) to choose from, there are a lot of ways to meet your investment goals.
But among these numerous strategies, it's hard to overlook just how successful buying and holding high-quality dividend stocks has been over the long run.
Companies that pay a regular dividend are almost always profitable on a recurring basis and can often provide transparent long-term growth outlooks. Most importantly, they have historically outperformed non-payers over long periods.
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Last year, researchers at Hartford Funds, in collaboration with Ned Davis Research, refreshed data from their report, The Power of Dividends: Past, Present, and Future. This report compared the performance of dividend-paying companies to non-payers over a half-century (1973-2023).
However, high-quality dividend stocks don't grow on trees and require some effort by investors to uncover.
There are only a handful of elite dividend stocks
More than 1,000 stocks currently pay a dividend, but only a small percentage of these companies have been doling out dividends and/or growing their payouts for an extended period of time.
For example, healthcare conglomerate Johnson & Johnson(NYSE: JNJ) has increased its base annual payout for 62 consecutive years and is one of only two publicly traded companies with the highly coveted AAA credit rating from Standard & Poor's. The company's high-margin novel-drug segment, coupled with its perfectly positioned medical technologies division, makes it one of the safest dividend stocks on the planet.
Consumer staples goliath Procter & Gamble(NYSE: PG) offers an even longer streak of increasing its base annual payout: 68 years (and counting). Having a vast portfolio of brand-name household and personal products -- such as Crest, Tide, Charmin, Gillette, and Pampers -- ensures steady operating cash in any economic climate.
Though there a few dozen companies that have increased their base annual payout for 50 or more consecutive years (the Dividend Kings), just over a dozen publicly traded companies have paid a consecutive annual dividend for more than 100 years.
Integrated oil and gas giant ExxonMobil and power tools manufacturer Stanley Black and Decker have dished out continuous dividends since 1882 and 1876, respectively.
And yet there's one virtually unknown dividend stock whose streak of consecutive payouts is more impressive than any of these brand-name businesses.
Image source: Getty Images.
Wall Street's greatest dividend stock is historically cheap
Though it may not have the highest yield, Wall Street's greatest dividend stock is small-cap water utility York Water(NASDAQ: YORW).
The reason most investors aren't familiar with York Water is because it's tiny in multiple respects. America's oldest investor-owned utility provides water and wastewater services for 56 municipalities spanning four counties in south-central Pennsylvania.
Altogether, the company services more than 300,000 people. In comparison, American Water has 14 million water and wastewater customers spanning 24 states.
American Water has a nearly $25 billion market cap and sees more than 1.15 million shares trade hands daily. York Water has a relatively modest $453 million market cap and a daily average volume of just 55,000 shares.
But what York lacks in visibility is more than made up for with its payout. It has been paying a consecutive dividend since its founding in 1816 -- i.e., since our fourth president, James Madison, was in the White House. The 208-year streak of consecutive payouts that York is riding is six decades longer than Stanley Black & Decker and double that of Coca-Cola (since 1920).
One of the reasons income investors can count on York to deliver year after year is because it provides a basic necessity. Demand for water and wastewater service doesn't change much from one year to the next, which leads to highly predictable operating cash flow.
To build on this point, most utilities (water, electric, and gas) operate as monopolies or duopolies in the areas they service. It's incredibly costly and time-consuming to get the infrastructure in place that's needed to meet the demands of homeowners and businesses. This lack of competition makes York's operating cash flow even more predictable.
To keep with the theme, York Water is a regulated utility. This means it requires permission from the Pennsylvania Public Utility Commission before it can increase rates on its customers. While this might sound like a nuisance, it's actually important in the sense that it keeps the company from having to deal with unpredictable wholesale pricing.
The utility also makes regular bolt-on acquisitions to expand its reach. With all facets of its operating cash flow being highly transparent, management is able to inorganically grow the company without adversely affecting profits or its more than two-century-old dividend.
Besides paying a dividend for 208 consecutive years, as well as increasing its base annual payout for the last 28 years, York Water stock is historically cheap. Shares are valued at 20 times consensus earnings per share for 2025. It's been more than a decade since the price-to-earnings ratio (P/E) dipped below this level.
Lastly, the utility's 2.8% yield matches its high point over the last nine years. Its total return, including dividends, since this century began is 996%, which is considerably better than the S&P 500's total return of 547% over the same span.
In short, the only reason York's yield isn't higher is because its stock price has vastly outperformed the broader market. That's not something investors are going to complain about.
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