We recently compiled a list of the 10 Dividend Zombies and Kings with Longest Dividend Payouts. In this article, we are going to take a look at where The York Water Company (NASDAQ:YORW) stands against the other dividend stocks.
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).
A reservoir at sunrise, reflecting the regulated water company’s commitment to providing reliable water services.
The York Water Company (NASDAQ:YORW)
Consecutive Years of Dividend Payments: 209
The York Water Company (NASDAQ:YORW) tops our list of the best dividend zombies to invest in. The water services company has never missed a dividend in 209 years, the longest streak held by any publicly traded company in the US market. The company offers a quarterly dividend of $0.2108 per share and has a dividend yield of 2.34%, as of June 20. It has been rewarding shareholders with growing dividends for the past 27 years.
As a water utility company, The York Water Company (NASDAQ:YORW)’s growth depends on its customer base and water and wastewater rates. Since it can’t directly control prices, the most effective way for the company to expand is by increasing its number of customers. The company has pursued growth by acquiring other businesses within its territory. Its customer count rose modestly from 71,411 in 2019 to 78,000 at the end of 2023. The company’s revenue for FY23 came in at over $71 million, up from $60 million in the previous year.
The York Water Company (NASDAQ:YORW) benefits massively from its business model. Since the services provided by the company are needed by nearly every renter and homeowner, its operating cash flow remains clear and predictable year after year. Its operating cash flow for FY23 jumped to $32 million during the year, from $22 million in the prior-year period. The company’s debt situation might worry investors as it had $190 million in long-term debt at the end of 2023, which might become more expensive to manage if high interest rates persist. However, its debt/equity ratio of 0.85 positions it relatively in a safe spot.
At the end of the March quarter of 2024, 9 hedge funds held stakes in The York Water Company (NASDAQ:YORW), up from 8 in the previous quarter, as per Insider Monkey’s database. These stakes are valued at over $37 million in total.
Overall YORW ranks 1st on our list of the dividend zombies and kings with longest dividend payouts. You can visit 10 Dividend Zombies and Kings with Longest Dividend Payouts to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of YORW as an investment, our conviction lies in the belief that deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is as promising as YORW but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.