3 Dividend Kings For Long-Term Investors

50+ Years Of Dividend Growth From These 3 Dividend Kings

dividend kings

Today’s article about 3 dividend kings is a guest post from Sure Dividend.

At Sure Dividend, we are huge proponents of investing in high-quality dividend growth stocks. One way to measure this is by focusing on the stocks with the longest track records of raising their dividends every year.

This way, investors can be sure that they are investing in proven companies that have stood the test of time.

The Dividend Kings are a group of fewer than 30 stocks that have each increased their dividends for at least 50 consecutive years. Let that sink in for a moment—these are companies that have navigated wars, recessions, and many other challenges. Despite these threats, they continued to hike their dividend payouts year after year.

These 3 Dividend Kings have increased their dividends annually for over five decades, and also have significant competitive advantages and the potential for continued growth. They have clearly demonstrated policies for paying dividends.

Dividend King #1: Federal Realty Investment Corp. (FRT)

Federal Realty Investment Corp. is a Real Estate Investment Trust, also referred to as a REIT.

The business model for REITs is to acquire properties that are rented out to tenants. With the rental income received from properties, REITs return cash to shareholders and invest in new properties. This creates a steady stream of income as well as modest growth from year to year.

Federal Realty manages, owns and redevelops primarily open-air shopping centers, as well as mixed-use properties. As of the most recent quarter, Federal Realty had over 100 properties in its portfolio, with approximately 3,000 tenants and over 2,600 residential units. Properties are focused in major metropolitan markets including New York, Los Angeles, Chicago, Miami, Boston, and Philadelphia.

A focus on highest-quality properties affords the company industry-leading rents and steady growth. For example, cash rents per square foot as of the 2019 third quarter were $28.28 for Federal Realty, well above the $18.22 peer-group average. And, Federal Realty has generated over 20 consecutive years of comparable space rent growth.

Investors should take comfort in the fact that Federal Realty is a well-capitalized REIT with a strong balance sheet. According to the company, it is one of only 6 REITs with a credit rating of ‘A’ or higher. A strong balance sheet and high-quality property portfolio have allowed the company to maintain the longest record of annual dividend increases—52 years—of any REIT.

Federal Realty stock has an attractive dividend yield of 3.6%. While this is below the yields available on many lesser-quality REITs, Federal Realty makes up for this with a best-in-class property portfolio and a very long history of dividend growth.

Dividend King #2: Altria Group (MO)

Altria is a consumer products giant.

The company has exposure to a number of categories including cigarettes, chewing tobacco, cigars, e-cigarettes, and some liquid refreshments like wine. Its biggest brands include Marlboro, Skoal, Copenhagen, and St. Michelle brands, among others. The company also has a 10% equity stake in global beer giant Anheuser Busch Inbev (BUD).

Altria is widely considered a sin stock, which means that it manufactures vice products. Sin stocks such as tobacco and alcohol stocks are broadly attractive for investment because they tend to generate high levels of free cash flow and return lots of cash in the form of dividends paid to shareholders.

Altria is a highly profitable company. Earnings-per-share, adjusted for non-recurring items, increased by 7.4% for the most recent quarter, and 5.8% for 2019. The company has a targeted dividend payout ratio of 80% of adjusted earnings-per-share. With a current dividend payout of $3.36 per share, Altria’s trailing dividend payout ratio is 79.6%, based on 2019 adjusted EPS of $4.22.

The company’s future growth will be fueled by its investments in new product categories, primarily vaping and marijuana. Altria invested nearly $13 billion for a 35% stake in e-cigarette maker JUUL and separately invested $1.8 billion for a 45% stake in the marijuana company Cronos Group (CRON). These investments, along with the company’s existing investments in wine and beer, show that it is determined to branch out from traditional cigarettes. 

Altria has tremendous competitive advantages. It has the most valuable cigarette brand in the U.S., Marlboro, which commands greater than a 40% domestic retail share. This gives Altria the ability to raise prices to drive revenue growth, as it has done for many years. Thanks to Altria’s stable growth, the company increased its dividend for the 50th consecutive year in 2019, placing it on the exclusive list of Dividend Kings.

Dividend King #3: Farmers & Merchants Bancorp (FMCB)

Finally, we think income investors should consider Farmers & Merchants Bancorp. This company might be the most under-covered Dividend King.

It is a small-cap stock, with a market capitalization below $1 billion. But despite its small size, the company has a highly impressive streak of annual dividend increases. It has increased its dividend for 55 years in a row. It has paid consistent dividends to shareholders for 85 consecutive years.

Farmers & Merchants is a small regional bank headquartered in California. But it is a highly profitable company that has generated steady growth for decades. In the fourth quarter, the company generated earnings-per-share of $18.54, along with a return on assets of 1.61% and return on average equity of 16.9%.

Last year was a very strong performance for Farmers & Merchants. It earned record net income of $56 million, up 23% from 2018 and amounting to $71.18 per share. Total assets ended the year at $3.72 billion, an 8.4% increase from the prior year.

Farmers & Merchants will continue to benefit from the strong U.S. economy. It will also generate growth from acquisitions. It acquired Delta National Bancorp in 2016 which increased its locations by 4. Moreover, in October-2018, it completed its acquisition of Bank of Rio Vista, to further expand in the San Francisco East Bay Area.

Farmers & Merchants pay a current annual dividend payout of $14.20, after lifting its dividend by 1.4% last November. With a 2019 dividend payout ratio of just 20%, the dividend is highly secure, with plenty of room for annual increases in the years to come.

The stock has a relatively low current yield of just 1.8%. But, this is still competitive when compared to the dividend yield of the S&P 500 stock index.

Final Thoughts

With interest rates on the decline again, income investors may have a harder time finding suitable yields in the stock market. Dividend stocks are attractive for investors who prefer to receive cash flow from their investment portfolios.

We recommend investors consider investing in high-quality dividend growth stocks, such as the Dividend Kings, and these 3 Dividend Kings in particular.

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Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I’m long these Dividend Kings mentioned in the article: Altria, Sysco, Emerson & Genuine Parts

12 thoughts on “3 Dividend Kings For Long-Term Investors”

  1. Hey Tom and Sure Dividend,

    Wow, FMCB is intriguing! It’s had quite a run; I’m putting it on my watchlist and may buy it when it’s cheaper (or when my broker offers fractional shares :-).


    • Yeah. How about that stock price, Miguel. Whatever happened to the good old days of stock splits? Tom

  2. I see the disclaimer comment on these type of articles my question is was jesse livermore liscensed or is warren buffett or charlie munger ? Book learning taking & passing tests is just a start actual experiance of operating a business successfully is the key to the kingdom

    • I bought some additional shares last year in the low 40s. But so far this year I have not. I guess I missed the recent bottom as it relates to MO. Kind of hanging out to see if we will take another leg down in the market. But, probably won’t add to MO. It’s already one of my larger positions.

  3. Another nice write-up by Sure Dividend! I like the Sure Dividend philosophy of quality stocks for the long term. Thanks for putting this together, Tom. I had a guest post from Sure Dividend recently, and I just wrote about MO in my most recent post.

    • Hi Graham. Sure Dividend is certainly a quality outfit. They think about the benefits of dividend investing similar to us. Tom

  4. Thanks for all of the great ideas here! I’ll definitely be combing over the full list of dividend kings linked to the article as well. Lots of dividend paying companies offering high yields amidst all the chaos at the moment!

    • Investing in Dividend Kings is a great strategy, especially in difficult times. Good luck with your investments! Tom

  5. I love Dividend Kings, that’s why I’ve created a nice Excel-file of the best Dividend Growth Stocks. The list is updated monthly and available for normal investors. Today, Altria is one of the best yielding Dividend Kings on the list. I agree with you in your article. Exxon and Sysco have top yields too but yields are not the first reason for a stock. Dividend growth is more important.

    • Thanks for visiting. Exxon and Sysco have really been hit hard by this year’s unprecedented events. It will be interesting to see if they can maintain their status as Dividend Kings moving forward. Tom

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