Dividend Kings aren't normally the most generous when it comes to dividend growth. After all, to keep a dividend streak going, a company can just raise its dividend by a penny each year. Although these can be reliable dividend stocks to own for the long term, they aren't usually good dividend growth stocks to own.
However, both Abbott Laboratories (ABT -0.39%) and American States Water (AWR -0.61%) are exceptions. These businesses have done more than just the minimum to keep their streaks going. They both yield around 1.7%, which is in line with the S&P 500 average, but that is misleading as their dividend payments today are much greater than they were just five years ago.
1. Abbott Laboratories
Abbott Laboratories is a diversified healthcare company; it generates revenue through its nutrition, diagnostics, pharmaceuticals, and medical devices segments. It has made for a solid investment over the past several years. Its shares are up over 120% (not including dividends) in five years which is far better than the S&P 500, which has climbed a more modest 67% over that period. That impressive increase in value is a key reason that Abbott's dividend yield isn't as high -- the higher the share price, the lower the yield becomes since it costs more money to collect the same dividend.
Investors, however, are likely more than happy with that trade-off as it allows them both to bank some attractive gains along with a decent dividend. Today, Abbott pays its shareholders a quarterly dividend of $0.47 per share. Five years ago, it was only $0.265, which means it has risen by 77% during that stretch, averaging a compound annual growth rate (CAGR) of 12.1%.
Abbott made a particularly generous 25% increase to its dividend in 2021 when it raised its quarterly payment from $0.36 to $0.45. Those types of rate hikes aren't typical for the company, but they are positive signs that the business is committed to creating value for its shareholders. With 50 years of consecutive rate hikes, Abbott is a Dividend King and one of the better dividend growth stocks you'll find out in the markets today.
If you're looking for an income investment you can buy and hold, Abbott should be near the top of that list for its diversification and strong dividend.
2. American States Water Company
Utility companies generally make for good income investments because they have a steady stream of recurring income. That can help investors predict how the business will perform over the long term. And American States Water is no exception. The company serves over a million people in nine states. It provides multiple segments: water, electric, and contracted services.
American States Water also has an impressive track record of paying dividends going back to 1931. Last month, it announced an 8.9% increase in its quarterly dividend. On an annual basis, it will be paying its shareholders $1.59 per share, up from $1.46 previously. That marks the 68th consecutive year that the company has raised its payouts. Even among Dividend Kings, that's an incredible accomplishment as no other company in the S&P 500 has such an impressive streak going.
Five years ago, the company was paying $0.255 per share, and the dividend has climbed 56% during that time. That averages out to a CAGR of 9.3%.
American States Water has generated some good, steady growth over the years with revenue of $436.8 million in 2018 rising to just under $499 million this past year, representing an increase of 14% during that time. Over five years, its gains of 73% are slightly better than the S&P's gains.
American Water and Abbott Laboratories both make for safe, long-term dividend stocks you can comfortably buy and forget.