Dividend stocks are an investor's best friends. Image source: Getty Images.
Dividend stocks are among the best investment tools to build wealth in the long run, simply because dividends, when reinvested, can grow manifold over the years as compounding works its magic. Income investors usually look for high yields, but great dividend stocks are those that have increased their payouts consistently for years regardless of the business conditions. And when those years stretch to decades, you know you've found the creme de la creme of dividend stocks.
These six Dividend Aristocrats have raised their dividends for a staggering 60 years or more: American States Water (AWR 0.87%), Northwest Natural Gas (NWN), Dover Corp (DOV -0.97%), Procter & Gamble (PG 0.65%), Emerson Electric (EMR -1.51%), and Genuine Parts Company (GPC -0.33%). The fact that most of these aren't really big names makes them even more intriguing. Here's all you need to know about the dividends and growth prospects of each of these six incredible dividend stocks.
A water utility makes for a great defensive dividend stock. Image source: Getty Images.
American States Water: A fantastic defensive dividend stock
A company that deals in a necessity like water can't possibly ever be on the wrong side of the business. Through its three subsidiaries, American States Water provides water to more than 261,000 customers in 10 counties in Northern, Coastal, and Southern California, and electricity to roughly 24,000 customers in the Big Bear region, aside from operating and managing water and wastewater systems on military bases throughout the U.S. Water brought in 70% of the company's total revenue last year.
The drought in California expectedly hit American States, but prudent cost control helped the company keep its operating margin above 20% and grow its dividend at a compounded average clip of 10.7% in the past five years. American States has now increased its dividends for 62 straight years, with the stock currently yielding 2%. With a defensive business, proven resilience, and commitment to shareholders, this dividend stock should continue to lead the pack of dividend champions for several years, if not decades.
A regulated business allows NW Natural to pay strong dividends. Image source: Getty Images.
Northwest Natural Gas: Big dividend growth potential
Northwest Natural Gas -- or NW Natural, as the company calls itself -- is a regulated natural gas utility serving more than 700,000 customers in Oregon and Southwest Washington. NW Natural has ranked among the top two gas utilities in the country in nine out of the last 10 J.D. Power Gas Utility Residential Customer Satisfaction studies.
If that speaks volumes about NW Natural's brand loyalty, the company's incredible streak of 61 years of consecutive dividend increases despite the seasonality of its business reflects its resilience. A rapidly expanding customer base and regulated rates have helped the utility grow revenue and cash flow consistently, and maintain operating margins well above 10% in the past decade.
With the City of Portland and Multnomah County, in Oregon, now committing to 100% electricity from renewable energy sources by 2035, NW Natural has huge opportunities ahead, which is great news for income investors. The stock currently yields a good 3% in dividends.
Dover's diversified portfolio is a strong plus for dividend lovers. Image source: Dover.
Dover Corp: A top industrial dividend stock
Dover manufactures and sells equipment and components through four business segments: Engineered systems (industrials and fast-moving consumer goods), energy, fluids (pumps and filtration systems), and refrigeration and food equipment. While engineered systems is its largest segment, the share of energy has declined considerably in recent years as oil prices collapsed.
The weakness in oil and gas markets, however, hasn't hurt Dover's dividends -- the company has now increased its dividends for 61 consecutive years. Dover's incredible dividend streak can be attributed to management's disciplined capital allocation policies, which include targeted annual capital spending of 2% to 2.5% of revenue, and generation of free cash flow worth 10% to 11% of revenue.
Dover's latest strategy to combine acquisitions -- it acquired 17 companies in the past three years for roughly $2.9 billion -- with targeted annual organic growth of 3% to 5% should mean fatter dividend paychecks and yields at or above the current 2% in coming years.
Procter & Gamble's dividends should keep growing. Image source: Getty Images.
Procter & Gamble: Big brand, bigger dividends
It isn't surprising to see a household name like Procter & Gamble on this list. Chances are, you and I are using one or more P&G product daily from among its many multibillion-dollar iconic brands that include Gillette, Oral-B, Tide, Pampers, Crest, Charmin, and Pantene, to name a few. A defensive business, coupled with a solid global footprint, has helped P&G grow its cash flows consistently over the years, so much so that it has rewarded shareholders with dividend increases for 61 straight years.
P&G's profits have come under a bit of pressure lately, compelling management to kick off aggressive restructuring, including the divestiture of less-profitable brands such as Duracell and Coty. Thanks to these moves, P&G is now on track to earn solid profits and convert 90% to 95% of profits to free cash flow this year. With management also striving to cut costs by $10 billion over the next five years to boost the company's coffers, income investors can trust P&G for several years to come.
Oil and gas is a key end market for Emerson Electric. Image source: Getty Images.
Emerson Electric: An interesting dividend play
Emerson Electric isn't a traditional utility as its name might suggest. On the one hand, Emerson's automation solutions segment helps manufacturers across diverse industries improve performance. On the other, its commercial and residential solutions segment provides heating, ventilation, and air-conditioning systems, services, and appliances for commercial and residential use.
An interesting business mix that includes focusing on hot trends like the Internet of Things along with prudent management under the leadership of CEO David Farr has helped Emerson generate boatloads of cash and raise dividends for 60 straight years. Having recently aligned operations into two focused segments and divested its network power unit in a multibillion-dollar deal, management is now focused on acquisitions to bolster growth. With the fruits of these efforts already showing up in the company's numbers, investors in Emerson can continue to expect rich dividends.
Genuine Parts is the top auto part dividend stock. Image source: Getty Images.
Genuine Parts: An industry dividend leader
Genuine Parts is a leading distributor of a wide range of automotive and industrial parts, as well as electrical, electronic, and office materials. Better known for its NAPA auto parts brand, Genuine Parts has established a strong presence across North America, Australia, New Zealand, and the Asia-Pacific region over its nearly 90 years of existence.
While automotive-replacement demand has been strong historically, a diversified portfolio has helped Genuine Parts grow its profits and cash flows at a stronger pace and pay superior dividends than most peers. The company's incredible record of 61 straight years of dividend increases is hard to match, and its 2.9% dividend yield is among the highest in the auto parts industry. With top names like Ford and Deere & Company as customers and the average age of vehicle fleets rising, Genuine Parts' dividend looks poised to grow even further in the years to come.
