Four Dividend Kings to Buy and Hold – Forever

By Floyd Saunders, The Author of Five Paths To Wealth, Family Financial Freedom and Figuring Out Wall Street.

When I worked for Wall Street investment banks, friends would frequently ask me for stock tips, thinking I might have inside information they could trade on. I didn’t.

For my investments, I actually stayed with broad Index funds, because I had to report my holding regularly to an internal review committee to make sure I wasn’t investing based on insider information.

Later I learned to focus on companies with a history of growing dividends. At least ten years of growing dividends was good (dividend champions). 25 years would be better (dividend aristocrats). But the most select list is that small set of quality stocks from companies that have paid a growing dividend for at least 50 years or longer, the Dividend Kings.

And for me, they must have a dividend reinvestment plan or DRIP that allows for a small monthly investment. That minimum investment could be as little as $10 a month, so anyone can get started.

Each of the stocks highlighted below fit the bill to make it easy to get started using their dividend reinvestment plan.

Start with the Dividend Kings, short list of stocks (of only 31 stocks) and you will be selecting from quality companies that will pay you a growing income.

There is no easier way to pick out a winning stock to hold for the long term than the limited number of stocks on the list of dividend kings.

What is a Dividend King? Dividend kings are a select list of stocks with 50 or more consecutive years of dividend increases, making this a rather exclusive list of companies worth investigating. This list was Initially created in 2010 by the guy who runs the Dividend Growth Investor website and newsletter. You can also find a complete list with up-to-date analysis of each stock in the list at SureDividend.com.

Dividend Kings include both mega corporations and smaller lesser-known companies. For dividend payout longevity and a stream of increasing dividend income, it would be hard to find a better place to start.

What does more than 50 years of growing dividend payouts mean for you?

Buying stocks from the Dividend Kings lists means your are buying companies that returned growing dividends in times of high of inflation, rising interest rates, economic recessions, the dot com crash, market crashes, changing consumer tastes, and major changes in technology that often cause lesser companies to cut dividends. Reinvesting dividends means you are taking free money provided you by these companies and buying even more shares in quality stocks.

Each of these companies, have cornered a segment of their market and built what Warren Buffet likes to call an “economic moat” so they prosper because their products or services continue to be in demand.

Dividend Kings tend to under-perform in bull markets, and outperform during bear markets. What this means for you in less variance in price, AKA volatility. A bull market is a when stock prices are generally rising and where the economy is sound; while a bear market exists in an economy that is receding, where most stocks are declining in value.

Dividend Kings are simply high-quality businesses with shareholder-friendly management teams that have built strong competitive advantages. Purchasing businesses with these characteristics and holding them for long periods of time will likely result in strong long-term investment performance.

What you will not find on the list is any technology stocks, so if you plan to invest in great companies like Microsoft, Apple, Amazon and Facebook, just realize they don’t have the dividend history of a Dividend King.

Warren Buffett is well known for avoiding technology stocks because he has been uncomfortable forecasting the industry’s performances several years out given its rapid pace of change. Yet today half of his portfolio is with Apple. Maybe they have earned a place in everyone’s portfolio, they just don’t have a history of paying increasing dividends yet.

Of course, not all the stocks in the Dividend Kings list make a great investment at any given time. With the bull market since 2008, some of these stocks are overvalued. One thing to consider is looking for stocks with a price-to-earnings ratio under 15.

Another filter to look at is a higher dividend yield. I like Dividend Kings with yields of 3% or higher. And several of the stocks on this list will show above-average dividend yields. But focusing on dividend yield means you miss out on a few great company like Lowe’s, a well-established home improvement store, but a dividend yield of only 1.9%. Don’t just look a the dividend yield or payout, You still want to make sure a company dominates its market share and is well managed.

The Dividend Kings I like include several of my favorite stocks each with dividend payout of between three and four percent. Plus these four choices represent different sectors of the stock market:

My favorite all-time stock is 3M, representing the industrial sector. Here is a detailed analysis of 3M.

Among the dividend kings, few can touch 3M Company’s (MMM) history of dividend growth. The company has increased its dividend for more than 60 years. The COVID-19 pandemic has slowed business this past year, but they still have a 3.5% dividend.

3M is a global company with operations in more than 70 countries and products in more than 200 countries. You likely use some of their more than 60,000 products every day at home or at work.

Next you want to consider Procter and Gamble (PG). Some investors say its time to move on from PG, but it still pays an excellent dividend, at 2.46%. It's a stock consumers know and you are likely to find many of their products in your home. Procter and Gamble in the Consumer Defensive sector of the stock market.

Procter & Gamble is one of the most well known dividend stocks, due to its long history of paying dividend. Their stock started trading on the New York stock exchange in 1891 and has paid a dividend every year since. The P&G dividend has been increased each year since 1957, or for 64 years.

Procter & Gamble is a consumer products giant that sells its products in more than 180 countries and generates over $70 billion in annual sales. P&G recently completed a major overhaul of its product portfolio, including a significant divestment of brands. Today, P&G has slimmed down to just 65 brands, down from 170. Procter and Gamble is still worth a look.

In the Healthcare sector, I would go with Johnson and Johnson (JNJ).

J&J is a global giant in the healthcare sector. It has a market capitalization of $361 billion, and generates annual revenue of more than $81 billion.

J&J operates in more than 60 countries and employs 134,000 people in more than 250 subsidiary companies. JNJ has a dividend yield of 2.8%. J&J has increased dividends for nearly 60 years. There are few certainties in the investing, but one of them is that J&J will increase its dividend each year.

Jumping over to Consumer Cyclical stocks, you should look at a quiet Dividend King, Genuine Parts Company (GPC). Not in the press a lot and you wouldn’t know it but they own Napa Auto Parts and supply most major auto manufacturers with parts.

This is another company that has increased its dividend for over 60 consecutive years, one of the longest streaks of annual dividend raises around.

Genuine Parts generated nearly $20 billion of revenue in 2019 and has a current market capitalization of $13.8 billion. Its dividend yield is 3.4%.

Cincinnati Financial (CINF) stock has outperformed the S&P 500 Index over the last 30 years, and has seen its the share price continue to rise based on it continued performance in what has been a difficult market. The combination of weak growth and a rising share price means the stock now trades for a relatively high valuation.

But I like its history of increasing its dividend to shareholders so I will continue to hold and invest for the longer term. Cincinnati Financial has increased its dividend payout every year for 59 years.

Dividend Kings include both mega corporations and smaller lesser-known companies. For dividend payout longevity and a stream of increasing dividend income, it would be hard to find a better place to start.

You can learn more about investing and managing your money to be more financial secure by reading Five Paths to Wealth.

Other books by Floyd Saunders include Family Financial Freedom and Figuring Out Wall Street.

You can learn more about him at his author web site.

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