Albemarle (NYSE:ALB) and A. O. Smith (NYSE:AOS) have each increased their dividends annually for 25 consecutive years. Far from soaring to new heights on this impressive record, A. O. Smith's stock is down roughly 40% since late 2017, with Albemarle down more than 50% from roughly the same time period. The outlooks here, however, aren't as bad as the stock price declines might suggest. Here's why investors with a long-term view of the world could use these stocks to build their retirement wealth.

We all want hot water

A. O. Smith is basically a boring industrial company, with the bulk of its business focused on making water heaters. Roughly 65% of its sales are in developed markets (largely the United States), where hot water is basically accepted as a given. Replacing old units is the big story here, with management projecting low-single-digit growth over time. This is the core on which the company is building its operations in emerging markets.

A man with his head on a table and a chart heading sharply lower behind him.

Image source: Getty Images.

China and India are the two big growth markets on which A. O. Smith is currently focused. Hot water in these markets isn't something that can be taken for granted, though everyone who can afford it certainly wants it. The company's long-term growth is pinned on the growth in demand in these markets.

In China, the company has seen annualized revenue growth of 19% over the past decade. It's also working on water- and air-purifying systems, two products that are expected to be big opportunities in a country not exactly known for its environmental protection practices. India is at an earlier stage, but A. O. Smith expects its target market there to more than double by 2030. And it's basically using the same playbook it used in China, so there's a good foundation underpinning its growth aspirations in India.

The biggest problem A. O. Smith is facing today is a combination of slowing growth in China and, somewhat intertwined, the broad fallout from the U.S./China trade fight. At this point, management is projecting overall earnings growth of around 4% in 2019, down from 20% in 2018 and the high teens in the previous two years. Clearly, A. O. Smith is dealing with a big headwind, but it doesn't change the long-term picture, in which the company provides things in fast-growing markets that customers really, really want. This trend is likely to outlast the short-term trade-war issues.

AOS Times Interest Earned (TTM) Chart

AOS Times Interest Earned (TTM) data by YCharts.

With debt at just 15% or so of the capital structure and covering its trailing 12-month interest expenses by 68 times in the first quarter, A. O. Smith's balance sheet looks like it's in great shape. The payout ratio, meanwhile, is roughly 33%, not even close to a troubling number. The dividend yield is up to 1.6% -- near decade highs. For long-term investors willing to buy a financially strong company facing some near-term pressure, A. O. Smith could be a good growth opportunity that will help build your nest egg and income stream for retirement.

Electric cars are driving this company's future

Next up is Albemarle, which is probably best known as a lithium stock today. Lithium is a key ingredient in batteries, where fast-growing demand is coming out of the auto industry. The company expects the use of electric power in vehicles to increase demand for lithium by roughly 20% a year between 2018 and 2025. And it is gearing up to meet that demand.

Albemarle is looking to increase its production 30% in 2019, nearly 50% in 2020, and another 30% in 2021. After that point, it believes it could as much as double production, over time, if it needs to. That's the long-term growth story underpinning an investment in Albemarle. The big problem today is that lithium is a commodity, and investors got a little too excited about the electric car opportunity a few years ago. That led to a steep run-up in lithium prices and any stocks associated with the industrial metal. As investors have moved on to the next big growth story, lithium prices have fallen, and so have the associated stocks. But that doesn't change anything about the plans or opportunity here.

Meanwhile, it's important to note that lithium makes up just 40% or so of Albemarle's adjusted EBITDA margin. The rest comes from its bromine and catalyst divisions, markets in which management estimates it is the No. 2 global supplier. This is not a one-trick pony; it is building its lithium business on a solid foundation.

ALB Times Interest Earned (TTM) Chart

ALB Times Interest Earned (TTM) data by YCharts.

Looking at the balance sheet, long-term debt makes up around a third of the capital structure. Interest expenses were covered 16 times over in the first quarter. And the dividend payout ratio was a paltry 20%. Albemarle's nearly 2% yield, meanwhile, is around decade highs. There will be ups and downs along the road, but the trend toward electrification of the vehicle industry doesn't look like it's about to stop. And if you can see that long-term picture, the downturn in Albemarle's stock could be a good opportunity to grow your wealth and income stream over time. In the near term, well, Albemarle expects 2019 sales to increase by between 8% and 14%, with earnings growth between 11% and 19% -- not exactly a troubling performance.

No straight lines

Wall Street and the stocks that make it up zig and zag over time. It's inherent to investing. Right now, the deep declines in A. O. Smith and Albemarle suggest that there are horrible things happening at these companies. That just doesn't appear to be true. Yes, A. O. Smith is facing some growth issues in key markets, and Albemarle has to deal with Mr. Market's mercurial opinion on lithium, but the big stories remain intact. For investors with a long-term view, these financially strong dividend payers could help build retirement wealth and, assuming dividend growth continues, retirement income, too.