Though there are a lot of different strategies that can help investors build wealth over time, few have been more successful than buying dividend stocks. Companies that pay a regular dividend are almost always profitable on a recurring basis, time-tested, and they typically offer transparent long-term growth outlooks.
In addition, a report from J.P. Morgan Asset Management found that income stocks have vastly outperformed their non-paying peers over the long run. Between 1972 and 2012, companies that initiated and increased their payouts averaged an annualized return of 9.5%. That compares to a meager 1.6% average annual return for non-dividend stocks over the same period.
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But not all dividend stocks are created equally. Among the hundreds of companies currently paying a dividend, only a little over a dozen have been doling out continuous payments for more than 100 years. Within this elite group are three stocks that have been paying a continuous dividend longer than any other publicly traded company listed in the U.S.
ExxonMobil: 140 consecutive years of dividend payments
Originally known as Standard Oil in the 1800s, oil major ExxonMobil (XOM 1.15%) offers the third-longest consecutive payout in America. The company began doling out dividends in 1882 and hasn't stopped since. That's 140 years in a row and counting, for those of you keeping score at home.
There's no question that oil stocks faced significant headwinds during the initial stages of the COVID-19 pandemic. Lockdowns in various parts of the U.S. and throughout the world led to historic demand drawdowns in oil and natural gas. While this certainly hurt oil majors, like ExxonMobil and drilling-focused energy stocks, ExxonMobil emerged relatively strong, thanks to its operating structure.
ExxonMobil is an integrated oil and gas company. This is a fancy way of saying that it owns and operates upstream (drilling and exploration) and downstream (chemical plants and refineries) assets. Ideally, oil and gas prices remain high, because this allows the company's higher-margin upstream segment to benefit.
But in the event that energy commodity prices fall, it reduces the input costs for the company's downstream assets and generally provides a demand lift for petroleum-based products. This diversity of operation helps the company navigate inevitable economic downturns better than most of its peers.
Another reason ExxonMobil has been a rock-solid dividend payer is its balance sheet. Although the company raised capital by disposing of some of its noncore assets during the pandemic, it's pulled cost levers where necessary and wisely used the recent run-up in crude oil and gas prices to dramatically reduce its net debt. Since the end of 2020, ExxonMobil has reduced its long-term net debt from over $56 billion to less than $21 billion.
With global oil majors reducing their capital investments during the pandemic, and Russia invading Ukraine in February 2022, global energy-supply disruptions should provide favorable oil and gas pricing for ExxonMobil and its peers for years to come.
Stanley Black & Decker: 146 consecutive years of dividend payments
The second-longest continuous dividend payout among publicly traded U.S. companies belongs to industrial-stock Stanley Black & Decker (SWK). The company has paid a dividend each year since 1876, which works out to 146 consecutive years of dividend payments.
One of the biggest reasons for Stanley Black & Decker's payout consistency is its cyclical ties. Even though recessions are an inevitable part of the economic cycle, they generally last for just a couple of quarters. By comparison, periods of economic expansion are almost always measured in years. Spending disproportionate amounts of time in expansion has allowed Stanley Black & Decker's various operating segments to grow with the U.S. and global economy.
Stanley Black & Decker's growth and long-term success is also a reflection of its bolt-on acquisition strategy. This is a company that's used buyouts as a means of reaching new customers and complementing its existing operating segments.
The company was able to purchase the well-known Craftsman brand from Sears in 2017, added Newell Brands' tool business (also in 2017), and acquired the remaining 80% stake of MTD Holdings that it didn't already own last year. MTD is the company behind popular outdoor power-equipment brands Cub Cadet and Troy-Bilt.
Like ExxonMobil, Stanley Black and Decker knows when it's time to pull levers and tighten up its spending. Following back-to-back quarters of gross domestic product declines in the U.S. and a four-decade-high inflation reading of 9.1% in June, the company is moving forward with plans to achieve $1 billion in cost savings by the end of 2023.
This is primarily being done by transforming the company's supply chain and, to a lesser extent, simplifying its corporate structure. The company's supply chain shift, which involves leveraging its sourcing and consolidating some of its facilities, could be the key to boosting aggregate annual cost savings to $2 billion by 2025.
With a reasonably low payout ratio, Stanley Black & Decker should be able to continue its impressive 146-year continuous payout streak.
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York Water: 206 consecutive years of dividend payments
But the longest continuous annual dividend payment streak in the U.S. among publicly traded stocks belongs to a company that probably 999 out of every 1,000 investors have never heard of: York Water (YORW 2.36%). This Pennsylvania-based water-utility stock has been paying a dividend since James Madison was president in 1816. This year marks the 206th consecutive year of payouts, which is 60 years longer than Stanley Black & Decker, it's next-closest "competitor."
The reason virtually no one has heard about York Water before is because it's tiny. The company handles water and wastewater services for 51 municipalities spanning just three counties in South-Central Pennsylvania. Its primary means of growth, other than higher utility rates, has been to make acquisitions to add new wastewater and water customers.
Arguably the greatest thing about water-utility stocks is the predictability associated with their operating models. No matter how well or poorly the U.S. economy and stock market perform, water-consumption habits don't change much from year to year, which allows York to accurately forecast its operating cash flow for a given year. This means York can confidently set aside capital for its dividend, capital investments, and even acquisitions, without the fear that it'll adversely impact profitability.
York's success is also because it's a regulated utility. Regulated utilities require permission from state public-utility commissions before they can raise rates on their customers, so being regulated ensures they aren't exposed to potentially volatile wholesale pricing. Once again, the predictability of York's operating model plays a big role in its long-term outperformance and rock-solid payout.
To add to this point, most utilities in the U.S. operate as monopolies or duopolies. In other words, owners and renters have few, if any, choices when it comes to who provides their electricity, trash service, or water/wastewater services. I don't want to sound like a broken record, but this further supports the demand transparency that's made York such a solid income stock.
Although York Water's 1.8% yield might look a bit pedestrian given its long history of payouts, investors should consider that its share price has increased 670% since the mid-1990s. Including dividends, York's total return is nearing 1,500% in a little over a quarter of a century.
