Investors looking for the top echelon of safety in dividend stocks should examine the Dividend Kings. Each Dividend King has paid increasing dividends for 50 or more consecutive years. A company must have an extremely durable competitive advantage to pay increasing dividends for 5 consecutive decades. There are currently 16 Dividend Kings. Each Dividend King satisfies the primary requirement to be a Dividend Aristocrat (25 years of consecutive dividend increases) twice over.

Dividend Kings & Performance

From 1991 through 2014, the S&P 500 Index has returned 7.9% a year. For every $1 invested in the S&P 500 at the start of 1991, an investor would have $6.23 (all returns in this article include dividends unless stated otherwise). The worst performing of the current dividend kings returned 9.4% a year over the same time period – turning every $1 into $8.68. Out of the 16 current Dividend Kings, compounded investor money at 10% or more a year. The image below shows the return of each Dividend King by year from 1991 through 2014 (^GSPC is the ticker for the S&P 500 Index):

Dividend Kings Total Returns

Comparing the current 16 Dividend Kings to the S&P 500 would not be a fair comparison as the Dividend Kings ‘index’ includes lookback bias. Put another way, at the beginning of 1991, we didn’t know what stocks with 25 or more years of rising dividends would go on to have another 25 years of rising dividends. In 1991 there were 38 Dividend Aristocrats. There are 16 Dividend Kings, so more than half the Dividend Aristocrats of 1991 fell off the list. Every single one that didn’t produced returns significantly in excess of the S&P 500.

Investing in an equal weighted basket of the 16 current Dividend Kings in 1991 (and rebalancing each year) would have generated compound returns of 14.6% a year (nearly double the S&P 500 over the same time period). Every $1 invested would have turned into $24.36. While it’s not fair to compare performance due to look back bias, it is very informative to see that stocks that are able to continuously increase their dividend payments year after year substantially outperform the S&P 500. Looking for businesses that have a long history of dividend increases isn’t a perfect way to predict future stocks that will increase their dividends every year, but there is considerable consistency in the Dividend Kings (and Dividend Aristocrats) Indices.

This article will take a look at each of the current Dividend Kings to determine which ones are suitable investments likely to have decades more dividend growth – and which ones aren’t as timely. The long-term dividend growth rate, current dividend yield, and long-term total return of each stock will be shown, as well as how many consecutive years of dividend increases each stock has. Stocks are analyzed in alphabetical order. You can download a spreadsheet of this data below:

American States Water Co (NYSE:AWR)

Dividend Yield: 2.14%

10 Year Total Return: 14.46% per year

10 Year Dividend Growth Rate: 7.04% per year

Consecutive Dividend Increases: 60 years

American States Water is primarily a water utility operating in California. The company also operates an unregulated water utility service provider business serving military bases under 50 year contracts. American States Water was founded in 1929 and has grown to a market cap of $1.5 billion.

The company generates 70% of its revenue from the highly regulated water utility business in Californian, and another 8% from its electricity utility business in California. A total of 22% of revenues currently come from the company’s unregulated ASUS segment which serves 9 military bases under 50 year contracts. American States Water’s best growth prospects come from its ASUS segment.

The United States military is currently privatizing more of its bases’ water utility needs. Active bids are currently in process. American States Water plans to grow through winning these bids for new military bases.

American States Water company’s success is a result of sticking to what the company does best. The utility industry is low risk and offers very stable cash flows. American States Water has allocated capital from its primary utility business well. It bids on lucrative military contracts that have higher margins than its utility business. If it wins bids, it invests money to service new military bases. If the company doesn’t, it has a long history of returning cash to shareholders through both dividends and share repurchases.

Over the last decade, American States Water has compound investor returns at 14.46% a year. The company’s dividend payments have grown at about 7% a year while earnings-per-share have grown at about 10% a year. American States Water’s growth will likely continue at about the same rate as it has over the last decade.

The company currently trades for a price-to-earnings ratio of 25.25, which is somewhat excessive given the company’s solid-but-not rapid growth rate. American States Water is an excellent business that is currently trading at an inflated price-to-earnings multiple. The stock will be a better purchase when the price-to-earnings ratio falls below its 10 year average of about 20. The stock will likely be a strong buy when/if the price-to-earnings ratio falls into the teens.

Cincinnati Financial Corporation (NASDAQ:CINF)

Dividend Yield: 3.52%

10 Year Total Return: 6.56% per year

10 Year Dividend Growth Rate: 4.12% per year

Consecutive Dividend Increases: 54 years

Cincinnati Financial is a property and casualty insurer with operations in the United States. The company was established in 1958 and has increased its dividend payments for 54 consecutive years. The company sells insurance policies through its network of independent agents. Cincinnati Financial has grown to reach a market cap of $8.6 billion.

What sets Cincinnati Financial apart from other insurers is its large equity exposure. The company invests 35% of its insurance float into blue-chip stocks. This is about twice as much exposure to equities as the industry average (excluding Berkshire Hathaway). Cincinnati Financials’ above average equity exposure helps it to perform well during bull markets, but hurts it during bear markets when equity values fall. Since equities have historically outperformed fixed income investments over long periods of time, Cincinnati Financials’ above-average exposure to equities seems reasonable.

Cincinnati Financial has had below-average 10 year total returns and dividend growth. The company has struggled to maintain profitable underwriting operations over the last decade. Cincinnati Financial had underwriting losses in 2008, 2009, 2010, 2011, and 2012 – a streak of 5 consecutive years. This weak performance dampened the company’s equity portfolio gains from the recovery of the Great Recession from 2009 to today. Book value grew at just 1.54% a year over the last decade – somewhere around the rate of inflation.

On the positive side, Cincinnati Financial stock currently has a solid 3.5% dividend yield. The company currently trades for a price-to-earnings ratio of 16.4 which is about in line with its historical average. Investors in Cincinnati Financial should not expect rapid growth going forward. If the market enters another protracted bear market, the company’s book value will decline. Other insurers with long dividend histories will likely have better returns than Cincinnati Financial over the next several years.

Colgate-Palmolive Company (NYSE:CL)

Dividend Yield: 2.20%

10 Year Total Return: 13.05%

10 Year Dividend Growth Rate: 10.89%

Consecutive Dividend Increases: 52 years

Colgate-Palmolive is one of the most impressive branded consumer goods businesses in the world. The company has grown to a market cap over $62 billion thanks to its portfolio of well-managed brands, many of which are shown in the image below:

Colgate Brands

Colgate-Palmolive supports its strong global brands with large marketing spending. The company has spent between $1.7 billion and $1.9 billion on advertising in each of the last 5 years. The cumulative effect of large advertising spending increases brand awareness for the company and leads to revenue growth.

The company has undergone significant operating efficiency gains over the last several years. After-tax return-on-capital was 29.7% for the 4th quarter of 2014, significantly higher than the company’s peer group average of 18.5% and the S&P 500’s average of just 8.0%. Colgate-Palmolive is the market leader in many of its categories throughout the world. The image below shows the company’s market leadership position by product and geographical location:

Colgate Market Leadership

Colgate-Palmolive’s future growth will be driven by several key factors. The company is expecting continued growth in emerging markets. Emerging markets sales grew 9.5% from the 4th quarter of fiscal 2013 to the 4th quarter of fiscal 2014. Additionally, the company plans to grow by increasing gross margin through price increases, primarily in emerging markets. The company’s global growth and efficiency program should help to further reduce expenses which will also help the bottom line. The company will use these savings to increase advertising spending, further reinforcing growth.

Colgate-Palmolive is a world-class business. Unfortunately, the stock is trading at a lofty price-to-earnings ratio of 29.2 at this time. Colgate-Palmolive has grown earnings-per-share at about 6.7% over the last decade – hardly worthy of a price-to-earnings ratio near 30. At current prices, investors should wait to enter into a position in Colgate-Palmolive. With that said, the company should trade for a premium multiple due to the safety of its brands. A fair price-to-earnings ratio for the company is around 20, in line with its historical average over the last decade.

Dover Corp (NYSE:DOV)

Dividend Yield: 2.12%

10 Year Total Return: 9.70% per year

10 Year Dividend Growth Rate: 9.95% per year

Consecutive Dividend Increases: 59 years

Dover Corporation is a diversified manufacturer with a market cap of $12.1 billion. The company operates in 4 segments. Each segment is listed below along with the percent of total revenue generated by each segment for Dover in fiscal 2014:

  • Fluids: 18% of total revenue
  • Energy: 25% of total revenue
  • Engineered Systems: 33% of total revenue
  • Refrigeration & Food Equipment: 24% of total revenue

Dover Corporation has struggled recently due to low oil prices which have temporarily reduced earnings in the company’s Energy segment. Additionally, the strong U.S. dollar versus other currencies has hurt the company’s reported earnings. Still, Dover offers solid growth potential for long-term investors.

Over the last decade, Dover grew earnings-per-share at 7.5% a year. The company will likely realize similar earnings-per-share growth over the next decade. Dover is currently restructuring its manufacturing portfolio. The company recently divested its label printing unit for $185 million as well as its aerospace and defense unit for $500 million. Dover’s recent divestitures are part of an ongoing plan to streamline operating efficiency. The company plans to increase top line growth through international acquisitions. International acquisitions will provide the company with greater access to international markets. Over the past 3 years, Dover has spent over $2 billion on acquisitions. This trend should continue over the next several years, which will propel growth.

Dover Corporation is currently trading at a price-to-earnings ratio of just 16.2. The company appears fairly valued or somewhat undervalued at current prices. The stock also has a slightly above average yield of 2.1% as compared to the S&P 500.

Emerson Electric Co. (NYSE:EMR)

Dividend Yield: 3.20%

10 Year Total Return: 8.77%

10 Year Dividend Growth Rate: 8.43%

Consecutive Dividend Increases: 57 years

Emerson Electric is a diversified manufacturer with a market cap over $40 billion. The company has over 230 manufacturing facilities and 130,000 employees around the world. Emerson Electric is very much a global company, with less than 50% of revenue coming from the United States and Canada. Emerson Electric’s operations are broken down into 5 segments. Each segment is shown below along with the percentage of total revenue each segment generated in fiscal 2014.

  • Process Management: 36% of total revenue
  • Industrial Automation: 20% of total revenue
  • Network Power: 20% of total revenue
  • Climate Technologies: 16% of total revenue
  • Commercial & Residential Solutions: 8% of total revenue

Emerson Electric’s stock price has suffered over the last 12 month, falling 11.5% in that time frame. The company’s weak stock price performance is a result of both falling oil prices and a stronger United States dollar. The strong dollar hurts Emerson Electric as over half of its revenue is generated internationally. When the company exchanges currency back into dollars, it sees the negative effects of changing currency rates. The company is also exposed to oil prices as it manufactures products for the oil industry. About 12% of the company’s sales are generated in upstream oil and another 22% of sales are generates in midstream and downstream oil. Low oil prices will hurt upstream sales, but could provide a boost to midstream and downstream sales.

Despite the company’s current slowdown, management has plans for continued growth. The company will recover from both a strong United States Dollar and low oil prices as they are not permanent conditions. The dollar will fluctuate downward and oil prices will rise at some point in the future. When they do, Emerson Electric will look like a better investment. The company’s long-term earnings-per-share growth goals are 8% to 10% a year. Over the last decade, the company grew earnings-per-share at 8% to 10% a year. Emerson Electric will likely hit the low end of its growth goals over the next several years.

Emerson Electric stock currently trades for a price-to-earnings ratio of 18.6, which is in line with its long-term historical average. The company appears to be trading around fair value at this time. Emerson Electric stock has a well-above average dividend yield of 3.2% which should appeal to income oriented investors.

Genuine Parts Company (NYSE:GPC)

Dividend Yield: 2.7%

10 Year Total Return: 12.93% per year

10 Year Dividend Growth Rate: 8.43% per year

Consecutive Dividend Increases: 59 Years

Genuine Parts Company was founded in 1928 and now has a market cap of nearly $14 billion. The company distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic material. Genuine Parts Company’s operations are split into 4 segments. The percentage of total revenue generated by each segment in fiscal 2014 is shown below:

  • Automotive Parts: 53% of total revenue
  • Industrial Parts: 31% of total revenue
  • Office Products: 11% of total revenue
  • Electrical/Electronic Materials: 5% of total revenue

The Automotive Parts segment owns the well-known NAPA Auto Parts brand. The Industrial Parts segment operates under the Motion Industries Brand. The Office Products segment operates under the SP Richards name. Finally, the Electrical/Electronic Materials segment operates under the EIS name.

NAPA Auto Parts is the largest growth driver for Genuine Parts Company. NAPA is the leading distributor of automotive replacement parts in North America. The company recently expanded into Australia and New Zealand with the purchase of Repco. The company has added more than 50 new stores since the purchase of Repco and is now the market leader in Australia and New Zealand.

Motion Industries is Genuine Parts Company’s other significant growth driver. The segment is the leader in industrial maintenance/repair/operation parts in North America. Both NAPA and Motion Industries benefit from Genuine Parts Company’s strong distribution network and economies of scale which drive the company’s competitive advantage. Over the last decade, Genuine Parts Company has compounded earnings-per-share at 7% a year. The company’s long-term goal is to deliver earnings-per-share growth of 7% to 10% a year. Genuine Parts Company will likely deliver on this earnings-per-share growth goal is its strong distribution network and economies of scale continue to grow.

The company’s stock is currently trading for a price-to-earnings ratio of 19.7. This is about 10% to 15% higher than the company’s stock has historically traded over the last decade. Genuine Parts Company appears to be slightly overvalued at this time, although the company does make for a solid long-term investment thanks to its presence in the slow-changing replacement parts supply industry.

Johnson & Johnson (NYSE:JNJ)

Dividend Yield: 2.78%

10 Year Total Return: 8.26% per year

10 Year Dividend Growth Rate: 8.91% per year

Consecutive Dividend Increases: 52 years

Johnson & Johnson is one of the most stable businesses in the world. The company has increased its adjusted earnings-per-share for 31 consecutive years. The company has been able to achieve sustained success through diversification within the health care industry and geographical diversification. Johnson & Johnson currently generates more revenue outside the United States than inside. The company operates in 3 large market-leading segments. The breakdown of total sales each segment generated in fiscal 2014 is shown in the image below:

JNJ Segments

The key brands in the company’s consumer segment are: Motrin, Tylenol, Benadryl, Zyrtec, Band-Aid, Listerine, Aveeno, Neutrogina, and Johnson’s. The pharmaceutical segment’s key drugs are: Zytiga for prostate cancer, Remicade for Crohn’s disease and Ulcerative Colitis, Invega Sustenna for schizophrenia, Olysio for Hepatitis, Stelara for plaque psoriasis and psoriatic arthritis, and Simponi for rheumatoid arthritis. The company’s medical devices segment generates 85% of sales from products with #1 or #2 market share position.

Over the last decade, Johnson & Johnson has grown earnings-per-share at 6.1% a year. The company is not in a rapid growth phase. The appeal of Johnson & Johnson shares are the company’s stability. Johnson & Johnson’s stock price standard deviation is one of the lowest of any business over the last decade – even lower than stable utilities like Consolidated Edison (ED) and Southern Company (SO).

In addition to its stable growth, Johnson & Johnson offers shareholders a dividend yield of 2.78%. The company’s above-average dividend yield and stability should appeal to income oriented investors in or near retirement who can afford less risks. It is highly likely that Johnson & Johnson will continue to deliver dividend increases year-in-and-year-out as the health care industry continues to grow. Johnson & Johnson is currently trading at a price-to-earnings ratio of 18, which is a bit above the company’s historical average. The company is likely either slightly overvalued or around fair value at this time.

The Coca-Cola Co (NYSE:KO)

Dividend Yield: 3.24%

10 Year Total Return: 10.45% per year

10 Year Dividend Growth Rate: 9.04% per year

Consecutive Dividend Increases: 52 years

Coca-Cola is one of the most iconic publicly traded stocks. The company’s namesake soda is known throughout the world and is a symbol of America. Coca-Cola is famously a long-time Warren Buffett dividend stock holding. Coca-Cola has grown over the last several decades thanks to international expansion and growth in still (non-carbonated) beverages.

Coca-Cola currently owns 20 brands that generate more than $1 billion per year in sales. Three new brands joined the billion dollar club in 2014: Gold Peak Tea, FUZE Tea, and I LOHAS Mineral Water. It is notable that all three of these brands are non-carbonated. Coca-Cola is a global beverage company, not a U.S. soda company – the distinction is critical. The image below shows all 20 of Coca-Cola’s billion dollar brands:

KO Brands

Coca-Cola expects constant-currency earnings-per-share to grow at between 7% and 9% over the next several years. This level of growth is in-line with earnings-per-share growth over the last decade of 7.2%. Coca-Cola’s growth combined with its dividend yield of 3.24% gives investors an expected return of over 10%; not bad for a highly stable business in a slow-changing industry. Going forward, Coca-Cola expects to achieve its growth through both productivity gains and further international growth.

Coca-Cola currently trades for a price-to-earnings ratio of 19.8 (using adjusted earnings-per-share). The company is trading around its historical price-to-earnings ratio and is likely at fair value. While Coca-Cola is not undervalued at current prices, this high quality company is a good buy for long-term investors when trading at fair value.

Lancaster Colony Corp. (NASDAQ:LANC)

Dividend Yield: 2.04%

10 Year Total Return: 12.09%

10 Year Dividend Growth Rate: 6.45%

Consecutive Dividend Increases: 52 years

Lancaster Colony sells regional specialty food products under the Marzetti, New York, and Sister Shubert’s brands. Lancaster Colony was founded in 1961 and now has a market cap of $2.6 billion. The company is significantly smaller than other giant consumer products Dividend Kings like Coca-Cola, Colgate-Palmolive, and Procter & Gamble. Lancaster Colony spun-off its candle division in 2014 to focus its operations and become strictly a food business.

Lancaster Colony has shown weaker than expected earnings recently. The company has not been able to produce salad dressing at a fast enough rate. This was recently resolved thanks to the completion of the company’s salad dressing expansion project.

Lancaster Colony has no debt and about $250 million of cash on its balance sheet. The company is putting its cash to use with the acquisition of Flatout Holdings for $92 million. Flatout Flatbread sells health-focused flatbread wraps for making wraps instead of sandwiches. The company generates about $46 million in sales a year. Lancaster Colony could increase advertising and distribution of Flatout’s products to rapidly grow sales

Unfortunately for investors looking to start a position in Lancaster Colony, the company currently trades at a price-to-earnings ratio of 25.8 – which is significantly higher than the S&P 500’s current price-to-earnings ratio of about 20 as well as the company’s historical average price-to-earnings ratio. With that said, Lancaster Colony has solid growth prospects going forward. The company operates in a slow changing industry as well. The company’s branded consumer food products give it a durable competitive advantage. At current prices, Lancaster Colony is a hold.

Lowe’s Companies, Inc. (NYSE:LOW)

Dividend Yield: 1.30%

10 Year Total Return: 10.69% per year

10 Year Dividend Growth Rate: 25.83% per year

Consecutive Dividend Increases: 51 years

Lowe’s is the second largest big-box home improvement store in the U.S., behind only Home Depot. Lowe’s has a market cap of $67 billion versus $142 billion for Home Depot. Lowe’s was founded in North Carolina in 1946 and went public in 1961.

Lowe’s owns and operates 1,719 Lowe’s stores in the U.S. as well as 74 Orchard Supply stores on the West Cost. Lowe’s has expanded internationally over the last decade. The company now has 37 stores in Canada and 10 in Mexico. In addition, Lowe’s has a joint-venture with large Australian retailer Woolworth’s. Lowe’s has 33% ownership of 49 Masters Home Improvement stores in Australia as well as 33% ownership in the Australian Home, Timber, and Hardware Group.

In fiscal 2015, Lowe’s is expecting to open 15 to 20 new stores. This comes to store-count growth of around 1%. Lowe’s is expecting strong comparable store sales growth of 4.5% to 5.0% in fiscal 2015. Margin increases, share repurchases, and efficiency gains are expected to give a significant boost to earnings. Lowe’s management is projecting 21% earnings-per-share growth for fiscal 2015.

In contrast to expected fiscal 2015 growth, the company’s growth has been less-than-stellar over the last decade. Lowe’s has seen earnings-per-share grow at about 5% a year over the last decade. The company reduced its share count by 5.3% a year over the same time period. These means that all growth was a result of share repurchases; net profit actually declined slightly over the last decade for Lowe’s. For comparison, Home Depot grew earnings-per-share by 5.9% over the same time period, with share repurchases averaging about 5.3% points a year (the same as Lowe’s). Despite controlling significant market share in the U.S. big-box home improvement industry, neither Lowe’s or Home Depot has seen significant profit growth in the last decade.

On the positive side, Lowe’s 5%+ share repurchases and 1.3% dividend yield gives investors a shareholder yield of 6.3%. Additional growth is a bonus. Lowe’s tends to see rapid earnings-per-share growth during times of economic prosperity, and significant declines during recessions. With interest rates widely expected to rise in2015, the housing market could suffer. This could lead to another decline in earnings for Lowe’s. The best time to buy into Lowe’s is during economic declines when the stock’s price is depressed.


Dividend Yield: 2.60%

10 Year Total Return: 9.94% per year

10 Year Dividend Growth Rate: 8.22% per year

Consecutive Dividend Increases: 56 years

3M is among the largest diversified manufacturers in the world. The company now has a market cap of $100 billion, one of only 66 publicly traded companies on U.S. exchanges with market cap of $100 billion or more. 3M is not an overnight success. The company was founded in 1902 and has grown through innovation sustained for over a century.

3M operates in 5 segments. Each segment is listed below along with the percentage of total operating earnings generated by each segment for 3M:

  • Industrial: 32% of total operating income
  • Health Care: 22% of total operating income
  • Safety & Graphics: 18% of total operating income
  • Electronics & Energy: 15% of total operating income
  • Consumer: 13% of total operating income

The Industrial segment is 3M’s most important, followed by health care. Consumers in the U.S. are most familiar with 3M’s Consumer segment, which is actually its smallest segment. The consumer segment includes well known brands Filtrete, Command, and Post-It, among others.

Over the last decade, 3M has compounded earnings-per-share at 6.9% a year. The company’s long-term growth goal is 9% to 11% earnings-per-share growth per year. While dividends have grown within this range over the last decade, earnings-per-share have not. 3M plans to accomplish its aggressive growth goals through large research and development spending. The company is targeting spending 6% of revenues – about $2 billion– on research and development each year. The company is targeting a 14% compound annual growth rate on international new product sales as a result of research and development spending. 3M is also significantly increasing its Six Sigma certified head count in an effort to reduce manufacturing costs. So far, this has benefited shareholders as shown in the image below:

3M Costs

3M is currently trading for price-to-earnings ratio of 20.9. The company’s price-to-earnings ratio is near 10 year highs, making now an inopportune time to start a position in 3M. With that said, 3M is an extremely high quality business with a strong competitive advantage. The company makes an excellent long-term holding for dividend growth investors. Now is simply not the time to start a position in 3M.

Nordson Corporation (NASDAQ:NDSN)

Dividend Yield: 1.09%

10 Year Total Return: 16.08% per year

10 Year Dividend Growth Rate: 10.34% per year

Consecutive Dividend Increases: 51 years

Like 3M, Nordson is a diversified industrial manufacturer. The company was founded in 1954. Today, Nordson has a market cap of $5 billion. Nordson is about 20 times smaller than 3M. Don’t let the company’s small size relative to other industry giants dissuade you – Nordson has realized fantastic 10 year total returns. The company has compounded shareholder wealth at over 16% a year over the last decade.

Nordson has achieved this growth while being highly diversified geographically, by market served, and by product type. The company has 3 operating segments: Adhesive Dispensing, Advanced Technology, and Industrial Coating. The image below breaks down the company’s revenue sources by segment, geography, market served, and product type to show how well Nordson is diversified:

NDSN Diversification

Nordson has a good chance to continue growing earnings-per-share in double digits. The company has several growth opportunities ahead. The largest growth driver for Nordson is continued gains in emerging markets. The company’s Adhesive Dispensing segment will benefit from the trend toward more packaged and processed foods and use of lightweight plastics.

Over the past decade, Nordson has spent about 50% of its cash flows on acquisitions. Bolt-on acquisitions have propelled top and bottom line growth for Nordson over the last decade. The company will very likely continue to acquire smaller manufactures to grow. The company currently has about $700 million in debt and generates $400 million per year in operating income. The company is not over-levered currently and still has about $40 million in cash and significant borrowing capacity to fund further acquisitions.

Nordson is currently trading for a price-to-earnings ratio of 20.2. The company’s price-to-earnings ratio is in line with both the S&P 500’s and its historical average price-to-earnings ratio over the last decade. Nordson’s small size and growth prospects gives it potential for significantly more growth ahead. The company’s stock pays a below-average dividend yield of just 1.1% and the stock has higher-than-average volatility. Still, investors with a long time horizon should consider Nordson for exposure to the diversified manufacturing industry. Investors searching for average-or-better current income should look elsewhere.

Northwest Natural Gas Co (NYSE:NWN)

Dividend Yield: 4.00%

10 Year Total Return: 7.92%

10 Year Dividend Growth Rate: 3.82%

Consecutive Dividend Increases: 59

Northwest Natural Gas has one of the longest consecutive streaks of dividend increases of any business, with 59 years and counting. The company is a natural gas utility operating in Oregon and the southwest portion of Washington state. The company has over 700,000 customers and a market cap of $1.3 billion.

Northwest Natural Gas is not a rapidly growing business. The company has compounded dividends at just 3.82% a year over the last decade. Earnings-per-share have grown even slower; just 0.72% a year on average over the last decade. Earnings-per-share have grown slower than inflation over the last decade.

Northwest Natural Gas’s slow growth is only part of the problem. The company is been a net issuer of shares since 2007. Northwest Natural Gas should not be issuing new shares when growth has been so sluggish.

On the positive side, Northwest Natural Gas does have a dividend yield of 4%. The company’s dividend yield combined with its earnings-per-share growth rate of about 1% gives investors an expected return of somewhere around 5%. The company’s extremely stable gas utility revenue makes Northwest Natural Gas a safe play. The company’s relatively low expected total return makes Northwest Natural Gas a low-risk-low-reward investment.

A company with low total return expectations should trade at a lower than average price-to-earnings ratio. Unfortunately, Northwest Natural Gas does not. The company is currently trading for a price-to-earnings ratio of 21.5, around 10 year highs. Potential interest rate increases in 2015 could cause Northwest Natural Gas’s price-to-earnings ratio to fall as its dividend yield becomes less attractive in a higher yielding environment.

Parker-Hannifin Corporation (NYSE:PH)

Dividend Yield: 2.09%

10 Year Total Return: 11.64% per year

10 Year Dividend Growth Rate: 15.21% per year

Consecutive Dividend Increases:   58 years

Parker is a diversified industrial goods manufacturer with a market cap of $17.2 billion. The company was founded in 1918 and has grown its dividend payments for 58 consecutive years; one of the longest active streaks of any business.

Parker operates in 3 segments which cover 4 separate technology platforms. The image below breaks the company’s revenue down by both operating segment and technology platform:

PH Diversification

Parker has managed to grow earnings-per-share at 8.8% a year over the last decade. The company’s growth comes in large part from bolt on acquisitions. Parker has done more than 100 bolt on acquisitions in the last decade. The company has leading market share in the industrial motion and control manufacturing industries – and still controls only a tiny fraction of the diversified industry. This leaves the door open for more acquisitions in the future for Parker.

Compared to many of the other Dividend Kings, Paker looks like an absolute bargain. The company has a market cap of 15.7 which is well below the S&P 500’s price-to-earnings ratio of 20.7. Parker stock currently pays a dividend yield of 2.1%, which is slightly higher than the S&P 500’s dividend yield.

The company is expected to grow earnings-per-share at 8% to 10% a year going forward. Parker’s expected earnings-per-share growth combined with its dividend yield of 2.1% gives investors an expected total return of more than10% going forward. The company’s 10%+ total return potential combined with its reasonable price-to-earnings ratio make it a good choice for dividend growth investors looking for exposure to the industrial manufacturing industry.

Procter & Gamble Co (NYSE:PG)

Dividend Yield: 3.20%

10 Year Total Return: 8.07% per year

10 Year Dividend Growth Rate: 10.11% per year

Consecutive Dividend Increases: 58 years

Procter & Gamble is the largest consumer goods conglomerate in the world based on the company’s market cap of $217.8 billion. Procter & Gamble was founded in 1837. The duration of its success speaks to the power of the company’s brands and the very slow rate of change in the branded consumer products industry.

Procter & Gamble has a diverse portfolio of well known branded consumer products, including: Crest, Tide, Pampers, Head & Shoulders, and Gillette, among many others.

Procter & Gamble has not lived up to expectations over the last decade. Earnings-per-share have grown at under 6% a year over that time frame. The company’s slow growth was due to losing focus on any one particular brand by over-diversifying the companies’ product portfolio.

Procter & Gamble is taking steps to return focus to its core brands. The company is in the process of divesting over 100 brands. Notable recent divestitures include Durcaell to Berkshire Hathaway and the Camay and Zest soap brands to Unliverer. Procter & Gamble has divested about 35 of its 100 non-core brands to date.

Divestitures will help streamline Procter & Gamble’s operations, resulting in higher margins. The company will also have excess cash to return to shareholders. Procter & Gamble is expecting to repurchase about $5 billion worth of shares in fiscal 2015.

Management expects 10%+ constant currency earnings-per-share growth in fiscal 2015. The company is achieving growth through margin improvements and innovation within its core brands. Margin improvements are coming from decentralizing manufacturing and restructuring the company’s North American supply chain. In total, investors can expect total returns of between 9% and 13% a year from Procter & Gamble from earnings-per-share growth (6% to 10%) and dividend payments (~3%).

The market has taken notice of Procter & Gamble’s transformation. The company currently trades at a price-to-earnings ratio of 23.8, which is around 10 year highs. Procter & Gamble is a high quality business suitable for long-term holding, but now is not the time to enter into a position in the company.

Vectren Corp (NYSE:VVC)

Dividend Yield: 3.49%

10 Year Total Return: 10.72% per year

10 Year Dividend Growth Rate: 2.30% per year

Consecutive Dividend Increases: 55 years

Vectren is primarily a gas and electric utility operating in Indiana and Ohio. In addition to its gas and electric utilities business, Vectren also does pipeline construction, performance contracting, and sustainable infrastructure projects. Vectren generates 80% of its revenue from its utility business with 55% of utility revenue coming from electric utilities, and 45% from gas utilities.

Over the last decade, Vectren has grown dividends at 2.3% a year and earnings-per-share at just 1.2% a year. Management is much more optimistic about the company’s future than the past would indicate is prudent. Management believes they can grow utility earnings-per-share at 4% to 6% a year and non-utility earnings at 12% to 15% a year. The company believes it can generate total returns of 9% to 11% a year for shareholders over the next several years from dividends (3.5%) and earnings-per-share growth (5.5% to 7.5%).

Vectren currently trades for a price-to-earnings ratio of 21.6 – above the S&P 500’s price-to-earnings ratio. The company’s price-to-earnings ratio is near its 10 year high. Vectren stock appears priced for perfection at current prices. If management’s plans don’t go exactly as excepted, the company will likely see its price-to-earnings ratio fall significantly.

The potential for rising interest rates in 2015 could hurt Vectren. When interest rates rise, long-term bonds and businesses with little growth that pay high dividends – like Vectren’s utility segment – see their value decline. Value declines as interest rates rise because investors have access to higher yielding securities than before which drives down demand for utility like businesses.

Final Thoughts

Only 16 stocks meet the strict requirements to be a Dividend King. These 16 businesses are among the most long lived and stable publicly traded businesses. The Dividend Kings as a group all have excellent track records of dividend growth and total returns. Investing in high quality shareholder friendly businesses with long track records of success has historically compounded investor wealth.