Last year, artificial intelligence (AI) was the main focus in the markets, driving tech stocks to the forefront. These stocks rose by nearly 56%, accounting for the majority of the market’s gains. However, these trends quickly lose popularity once they emerge. Experienced long-term investors understand a crucial principle: while chasing short-term investment trends can often lead to disappointment, committing to a long-term strategy can yield success. As AI-related companies drove the market upward, the valuations of high dividend-paying companies quietly declined in comparison. It is not about attractive valuations of dividend stocks, these stocks also offer diversification benefits and the potential for a growing income stream, especially if the Fed decides to lower interest rates, making them a strong investment option. These stocks become more attractive when companies have a solid history of consistently paying and increasing their payouts. Read our list of Best Dividend Kings to Buy for Safe Dividend Growth.
Dividend zombies are companies that have paid dividends to shareholders for at least 100 consecutive years whereas dividend kings are companies boasting 50 years of dividend growth. Dividend growers have shown strong performance over the years, often surpassing the overall market returns. The Dividend Aristocrats index, which tracks the performance of companies with 25 consecutive years or more, has outperformed the broader market since its inception in 2005, with lower levels of volatility. Historically, the index has captured 90% of the market’s upward movements while experiencing only 82% of its declines. Currently, the Aristocrats are trading at a price-to-earnings multiple that is more than 10% lower than that of the broader market. This discount level has historically preceded prolonged periods of superior performance by the Aristocrats.
Since the end of 1989, there have been six calendar years where the broader market experienced negative performance. In each of these years, the Dividend Aristocrat index surpassed the performance of the broader equity benchmark by an average of 13.28%. Remarkably, the aristocrats delivered positive total returns in three of those years.
Given investors’ preference for dividend stocks, companies listed in the broader market indices are consistently increasing and sustaining their dividend payments. In the first quarter of 2024, the S&P’s main index distributed $151.6 billion in dividends, compared to $146.8 billion in Q1 2023. There were 796 reported dividend increases in the first quarter, totaling $22.7 billion, up from $19.7 billion in the prior-year period.
The impressive returns of dividend growers clearly demonstrate their strong performance. In this article, we will take a look at dividend zombies and dividend kings to invest in.
Our Methodology:
For this list, we selected companies that have paid dividends for over 100 years and also have strong dividend growth histories. Some of these companies are dividend kings, which means that they have raised their payouts for 50 years or more. We also considered the hedge fund sentiment around each stock, according to Insider Monkey’s database for Q1 2024. The stocks are ranked in ascending order of the consecutive years of dividend payments. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Union Pacific Corporation (NYSE:UNP)
Consecutive Years of Dividend Payments: 125
Union Pacific Corporation (NYSE:UNP) is an American transportation company that operates railroads, connecting 23 states. The transportation industry has experienced a decrease in demand for services over the past year because of widespread macroeconomic issues. However, UNP seems to be managing its operations effectively, as seen in its Q1 2024 earnings. The company reported revenue of $6.03 billion, which fell slightly by 0.4% from the same period last year. Its operating income of $2.4 billion showed a 3% growth on a year-over-year basis. This increase was primarily due to higher prices and a favorable mix of freight, which helped to counterbalance the decline in volume and lower revenue from fuel surcharges.
Jim Vena became the CEO of Union Pacific Corporation (NYSE:UNP) last August and is known for his focus on reducing costs. His actions were highly anticipated by Street analysts during the earnings period. In the most recent quarter, the company saw a 1% YoY improvement in workforce productivity and a 4% increase in freight car velocity. In addition, its operating ratio, which is a key indicator of efficiency, improved by 140 basis points to 60.7%. Wall Street analysts have a consensus Moderate Buy rating on UNP with a $265.3 price target, which reflects a 19% upside potential, as of June 20.
Union Pacific Corporation (NYSE:UNP) also showed a strong cash position in the first quarter of 2024, highlighting its financial strength alongside solid operational efficiency. The company’s cash generation is particularly great news for income investors, as it ensures smooth sailing for its dividend payments. In the most recent quarter, the company reported an operating cash flow of over $2.1 billion, up from $1.8 billion in the prior-year period. Its free cash flow also grew to $525 million, from $240 million. The company’s quarterly dividend comes in at $1.30 per share for a dividend yield of 2.34%, as of June 20. It is one of the dividend zombies on our list as the company has been paying dividends for the past 125 consecutive years.
At the end of Q1 2024, 87 hedge funds tracked by Insider Monkey reported having stakes in Union Pacific Corporation (NYSE:UNP), down from 90 in the previous quarter. The consolidated value of these stakes is roughly $5 billion. With nearly 6 million shares, Fisher Asset Management was the company’s leading stakeholder in Q1.
9. PPG Industries, Inc. (NYSE:PPG)
Consecutive Years of Dividend Payments: 125
PPG Industries, Inc. (NYSE:PPG) is a Pennsylvania-based paint and coat manufacturing company that offers a wide range of related products and services. The company has benefitted a lot from its European exposure. In the early 1900s, it was one of the first US companies to expand its operations into Europe by acquiring a glass plant in Belgium. Throughout the 1920s, the company experienced sustained growth driven by its glass and paint divisions, which mainly benefitted from the expanding automotive industry and the construction of skyscrapers. It expects its demand to stabilize in Europe for the second quarter of 2024 and continued growth in China and Mexico.
Since the start of 2024, PPG Industries, Inc. (NYSE:PPG) has declined by over 13% due to investor disappointment with the mixed first-quarter earnings and worries about weak growth. Despite this, the company’s management expects low single-digit organic sales growth for the year. They believe that increased demand from China and India will help balance out the declines in Europe and other markets.
ClearBridge’s Large Cap Value Strategy highlighted PPG Industries, Inc. (NYSE:PPG)’s European exposure in its Q2 2023 investor letter. Here is what the firm said:
“We were fairly active in the quarter as market dislocations allowed us to be opportunistic, while focusing on companies with stronger moats, better pricing power, more predictable long-term growth and higher returns. In the materials sector we exited PPG Industries, Inc. (NYSE:PPG) and initiated a position in Sherwin-Williams. While both companies operate in the paint and coating industry and are benefiting from improving margins as raw material prices have come down of late, we believe Sherwin-Williams’ dominant retail footprint affords it better pricing power through the cycle. The company provided conservative 2023 guidance and has been successfully gaining market share in the pro segment. While PPG has more European and industrial exposure, Sherwin-Williams’ residential and more domestic focus should also benefit the company as housing indicators appear to be troughing. Weak housing in the face of higher mortgage rates caused Sherwin-Williams stock to sell off in the first quarter, creating a compelling investment opportunity for long-term focused fundamental investors.”
PPG Industries, Inc. (NYSE:PPG), one of the best dividend zombies on our list, has been rewarding shareholders with growing dividends for the past 125 years. In addition, the company is a Dividend King with 52 consecutive years of dividend growth under its belt. The company pays a quarterly dividend of $0.65 per share for a dividend yield of 2.03%, as recorded on June 20.
As of the close of Q1 2023, 35 hedge funds in Insider Monkey’s database reported having stakes in PPG Industries, Inc. (NYSE:PPG), down from 39 in the preceding quarter. These stakes are collectively worth nearly $758 million.
8. Colgate-Palmolive Company (NYSE:CL)
Consecutive Years of Dividend Payments: 129
Colgate-Palmolive Company (NYSE:CL) ranks eighth on our list of the best dividend zombies. The company, that started a small soap and candle business, is now one of the largest manufacturing companies in the world, specializing in consumer products. Last month, Morgan Stanley released a list of companies they believe are well-positioned to withstand a weakening consumer market. The analyst at the firm highlighted companies rated as Overweight, where the market has not fully appreciated the positive strategic changes or adjustments these companies are making to handle the current consumer environment better. For Colgate-Palmolive Company (NYSE:CL), recent strategic changes, like emphasizing its e-commerce channel, are proving successful. While this improvement is somewhat reflected in the company’s valuation, we believe these strategic adjustments will drive sustained higher organic sales growth for CL compared to its peers in the long run.
In the first quarter of 2024, Colgate-Palmolive Company (NYSE:CL) reported revenue of $5.07 billion, which showed a 6.2% growth from the same period last year. The company has maintained its leadership in the toothpaste and manual toothbrushes market, holding a global market share of 41.3% and 31.7% so far this year, respectively. Its dividend payments are safe as its cash generation remains strong. The company generated over $681 million in operating cash flow and its free cash flow came in at $555 million.
Colgate-Palmolive Company (NYSE:CL) announced a quarterly dividend of $0.50 per share on June 13, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 62 years and has paid dividends regularly for 129 years in a row, which makes it one of the best dividend zombies on our list. The stock has a dividend yield of 2.06%, as of June 20.
Insider Monkey’s database of Q1 2024 indicated that 50 hedge funds owned stakes in Colgate-Palmolive Company (NYSE:CL), compared with 54 in the previous quarter. These stakes are valued at over $2.1 billion in total. With over 10.5 million shares, First Eagle Investment Management was the company’s leading stakeholder in Q1.
