Dividend stocks outperform non-dividend-paying stocks over the long run. It happens in good markets and bad, and the benefit of dividends can be quite striking -- dividend payments have made up about 40% of the market's average annual return from 1936 to the present day.

But few of us can invest in every single dividend-paying stock on the market, and even if we could, we're likely to find better gains by being selective. Today, two of the world's most popular confectioners will square off in a head-to-head battle to determine which offers a better dividend for your portfolio.

Tale of the tape
Founded in 1894, Hershey (NYSE:HSY) is the largest manufacturer of chocolates in North America and is a global leader in chocolate and sugar confectioneries. The company currently manufactures and markets more than 80 brands of sweets, including Kit Kat, Ice Breakers gum, and Twizzlers, as well as premium and artisan chocolate products. Headquartered in Hershey, Penn., Hershey has around 14,000 employees in more than 70 countries worldwide. During the 2010s, the company acquired a 49% interest in nutritional beverages producer Tri-Us, and also acquired Canada's Brookside Foods. Hershey has also continued to expand its international presence, particularly in China and Mexico.  

Founded in 1806, Tootsie Roll (NYSE:TR) is one of the largest manufacturers of sugar candies in the U.S. Headquartered in Chicago, the company operates manufacturing facilities throughout North America, and maintains distribution channels in more than 75 countries. Tootsie Roll manufactures and sells sugar candies through dollar stores, convenience stores and supermarkets, and its Charms and Tootsie Pops brands are the best-selling lollipops in the world. Tootsie Roll has acquired several famous confectionery brands over the years, including Cella's Confections, Charms, Andes Candies, and Concord Confections.



Tootsie Roll

Market cap

$23.5 billion

$1.8 billion

P/E ratio



Trailing-12-month profit margin



TTM free cash flow margin*



Five-year total return 



Source: Morningstar and YCharts. *Free cash flow margin is free cash flow divided by revenue for the trailing 12 months.

Round one: Endurance (dividend-paying streak)
Hershey began making quarterly shareholder distributions in 1931 and has been paying ever since, and Tootsie Roll hasn't missed a dividend since 1944. Both companies are endurance champs, but Hershey's 83-year streak puts it over the top here.

Winner: Hershey, 1-0.

Round two: Stability (dividend-raising streak)
According to Dividata, Hershey has increased quarterly dividend payouts at least once every year since 1989, which works out to 25 consecutive years of increases. On the other hand, Tootsie Roll has kept its dividend payouts firm over the past decade, with the exception of one special dividend in 2012. That makes this an easy win for Hershey.

Winner: Hershey, 2-0.

Round three: Power (dividend yield)
Some dividends are enticing, but others are merely tokens that barely affect an investor's decision. Have our two companies sustained strong yields over time? Let's take a look:

HSY Dividend Yield (TTM) Chart

HSY Dividend Yield (TTM) data by YCharts.

Winner: Hershey, 3-0.

Round four: Strength (recent dividend growth)
A stock's yield can stay high without much effort if its share price doesn't budge, so let's take a look at the growth in payouts over the past five years.

HSY Dividend Chart

HSY Dividend data by YCharts.

Winner: Hershey, 4-0.

Round five: Flexibility (free cash flow payout ratio)
A company that pays out too much of its free cash flow in dividends could be at risk of a cutback, particularly if business weakens. We want to see sustainable payouts, so lower is better:

HSY Cash Dividend Payout Ratio (TTM) Chart

HSY Cash Dividend Payout Ratio (TTM) data by YCharts.

Winner: Tootsie Roll, 1-4.

Bonus round: Opportunities and threats
Hershey may have won the best of five on the basis of its history, but investors should never base their decisions on past performance alone. Tomorrow might bring a far different business environment, so it's important to also examine each company's potential, whether it happens to be nearly boundless or constrained too tightly for growth.

Hershey opportunities

Tootsie Roll opportunities

Hershey threats

Tootsie Roll threats

One dividend to rule them all
In this writer's humble opinion, it seems that Hershey has a better shot at long-term outperformance, thanks to a solid pipeline of projects to fuel international revenue growth, especially in the Asia-Pacific region. In addition, Hershey's intriguing new plans for candy and other sweet products could improve its competitive position in chocolate and the sugar confectionery market.

On the other hand, Tootsie Roll's cost-cutting measures and marketing plans might help improve the bottom line, but that's not enough on its own to drive superior long-term growth. You might disagree, and if so, you're encouraged to share your viewpoint in the comments box below. No dividend is completely perfect, but some are bound to produce better results than others. Keep your eyes open -- you never know where you might find the next great dividend stock!

Here are a few more delicious dividends for your portfolio
One of the dirty secrets few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.