Is it possible to determine the top-performing stocks of the next half-century? Before looking into the future, we need to consider the past. So let's start at the very beginning, as Julie Andrews might say.

Fishing in a well-stocked pond
Those familiar with the work of Wharton professor Jeremy Siegel will know that dividend-paying stocks such as Altria and Coca-Cola have been some of the stock market's best performers since the beginning of the S&P 500 back in 1957.

The key to the amazing returns of these stocks was reinvested dividends. This is a theme we've covered in many articles here at the Fool, but that insight is worth emphasizing. If we are searching for top stocks for a time frame of 50 years, we need to look at dividend-paying stocks.

One place to begin our search might be the Mergent Dividend Achievers Select Index, whose constituents are U.S.-listed companies that have all increased their annual dividend payments for 10 or more consecutive years. Since 1997, the index has returned 8.7% per year on average, which compares very favorably with the S&P 500's 5.9% over that time.

The magnificent seven
The index contains 214 dividend-paying companies. I've put together a sample of seven of them below:


Dividend Yield

General Electric (NYSE: GE)


Automatic Data Processing (NYSE: ADP)


Nucor (NYSE: NUE)


Air Products & Chemicals (NYSE: APD)


Aflac (NYSE: AFL)


Lowe's (NYSE: LOW)


Cardinal Health (NYSE: CAH)


Data from Yahoo! Finance as of Jan. 30, 2008.

Most of these companies need no introduction. After all, who hasn't heard of GE, Lowe's, or Aflac? However, some of these names may be new to you.

Air Products & Chemicals produces gases for customers in the semiconductor, energy, home healthcare, and adhesives industries. The company has been a slow and steady grower over the past 25 years and reported record sales and earnings in fiscal 2007. Thanks to a renewed focus on controlling costs, the company greatly improved net margin and return on equity to boot.

Shares of Automatic Data Processing have fallen about 16% over the past three months, and this business-process outsourcer is starting to look cheap. This company provides human resources, payroll, and tax and benefits administration solutions for small and medium-sized businesses. Automatic Data Processing has $1.5 billion in cash, versus only $400 million in debt. And thanks to the capital-light nature of its business, it's a safe bet that the already-tasty dividend yield will continue to increase.

Will any of these be among the top stocks of the next 50 years? It's tough to say for sure, though I do believe one or two will make the list.

Looking ahead
So, a recap. If history is any indication, the top stocks of the next 50 years will be businesses that have stable, growing dividends; reasonable valuations (part of the reason for Altria's outperformance, Siegel says, is that the constant threat of litigation meant it was always undervalued); and good managers.

Even if you find a top stock of the next 50 years, the only way you'll benefit from those potential gains is to hold for the long term and let the power of reinvested dividends work in your favor.

James Early and Andy Cross, advisors of our Motley Fool Income Investor newsletter service, scour the markets for the best performers of the next 10, 20, and yes, 50 years. Income Investor recommendations boast an average dividend yield greater than 4% and, collectively, those picks are beating the market at large by about eight percentage points. You can see all our picks and research for free with a 30-day no-obligation trial. Click here to learn more about our favorite dividend-paying stocks.

This article was originally published Jan. 26, 2007. It has been updated.

John Reeves hopes he will be around to see how well these companies perform 50 years from now. He does not own shares of any companies mentioned in this article. Coca-Cola is an Inside Value pick. Aflac is a Stock Advisor selection. The Fool has a disclosure policy.