Dividend stocks outperform non-dividend-paying stocks over the long run. It happens in good markets and bad, and the benefit of dividends can be quite striking -- dividend payments have made up about 40% of the market's average annual return from 1936 to the present day.

But few of us can invest in every single dividend-paying stock on the market, and even if we could, we're likely to find better gains by being selective. Today, two of the world's largest and most (in)famous investment banks will square off in a head-to-head battle.

Tale of the tape
Morgan Stanley (MS 0.07%) is one of the world's largest investment banks. Morgan Stanley currently ranks among top 100 companies on the global Fortune 1,000 list and has more than 60,000 employees as well as clients around the world. Morgan Stanley has a highly diversified service portfolio ranging from investment banking and assets management to financial advisory and commercial banking.

The bank borrowed over $100 billion from the Federal Reserve during the 2008 financial crisis, making it one of the largest private borrowers of federal funds in history.

Goldman Sachs (GS 0.51%) is the global leader when it comes to mergers and acquisitions advice and securities underwriting and is ranked 68th on the global Fortune 100 list. Goldman Sachs has been a focal point of anti-Wall-Street rage for several years, a testament to both its leading role in the financial industry and the abiding distrust most people have for massive, poorly understood financial businesses. Goldman Sachs became one of the Dow Jones Industrial Average's newest members, and its first noncommercial bank, last year.

Round one: endurance (dividend-paying streak)
According to Dividata, Morgan Stanley started paying quarterly dividends in 1993 and has been paying ever since. Goldman Sachs has paid uninterrupted quarterly dividends since its first distribution in 1999. A 20-year dividend-paying streak allows Morgan Stanley to win the endurance crown easily.

Winner: Morgan Stanley, 1-0.

Round two: stability (dividend-raising streak)
Morgan Stanley kept increasing dividend payouts steadily at regular intervals until it significantly slashed shareholder distributions in 2009 amid the global financial crisis. Similarly, Goldman Sachs has kept dividend payouts firm over the entire dividend history, therefore its dividend-raising streak only begins in 2012. That's a pretty short streak, but it's better than Morgan Stanley's.

Winner: Goldman Sachs, 1-1.

Round three: power (dividend yield)
Some dividends are enticing, but others are merely tokens that barely affect an investor's decision. Have our two companies sustained strong yields over time? Let's take a look:

MS Dividend Yield (TTM) Chart

Winner: Goldman Sachs, 2-1.

Round four: strength (recent dividend growth)
A stock's yield can stay high without much effort if its share price doesn't budge, so let's take a look at the growth in payouts over the past five years.

MS Dividend Chart

Winner: Goldman Sachs, 3-1.

Round five: flexibility (free cash flow payout ratio)
A company that pays out too much of its earnings in dividends could be at risk of a cutback, particularly if business weakens. We want to see sustainable payouts, so lower is better:

MS Cash Dividend Payout Ratio (TTM) Chart

Winner: Morgan Stanley, 2-3.

Bonus round: opportunities and threats
Goldman Sachs may have won the best-of-five comparison on the basis of its history, but investors should never base their decisions on past performance alone. Tomorrow might bring a far different business environment, so it's important to also examine each company's potential, whether it happens to be nearly boundless, or constrained too tightly for growth.

Morgan Stanley opportunities

Goldman Sachs opportunities

Morgan Stanley threats

Goldman Sachs threats

One dividend to rule them all
It seems Goldman Sachs has a better shot at long-term outperformance thanks to its substantial brand value. Although it has been plagued by many controversies over the past decade, Goldman has managed to continue leading its (shrinking) industry and has yet to be significantly affected by political or populist blowbacks.

On the other hand, Morgan Stanley seems to be scrambling, divesting a once-important part of its trading operations, and lagging behind its peer in terms of fundamental strength. Sluggish economic growth around the world has hindered both Goldman Sachs and Morgan Stanley, which may yet suffer a very real setback should the Volcker Rule be implemented.

No dividend is completely perfect, but Goldman's appears to have a brighter future.