When a company earns a profit, that company can choose to reinvest those earnings back into the business or pay their profits out to shareholders as a dividend. Put simply, dividends are company earnings that are distributed to shareholders.
The Dividend Kings, as you might imagine, are companies that offer dividends. But more than that, they have shown dividend increases for at least 50 consecutive years. These S&P 500 Index giants are the crème de la crème of dividend stocks because their consistent dividend growth isn’t easy to achieve — any company on the Dividend Kings list is part of an exclusive powerhouse group.
In this article, we’ll walk you through understanding the Dividend Kings, list some Dividend Kings for 2022, go over the difference between Dividend Kings and Dividend Aristocrats (and sneak in a Dividend Kings ETF for your consideration). Finally, we’ll answer one of your most burning questions: should you invest in Dividend Kings?
Understanding the Dividend Kings
The Dividend Kings are stable, dependable companies that have a proven track record of 50 consecutive years of dividend increases. But what else distinguishes the Dividend Kings from other dividend stocks? Let’s go over a few characteristics of these storied institutions.
- Market capitalization: In order to belong to the list, a Dividend King must have a market capitalization, or market cap, of at least $3 billion. Market cap refers to the dollar amount of all of a company’s shares of stock. To qualify, they should also have an average trading volume of at least $5 million for the trailing three-month period before each quarterly rebalancing date.
- Mature companies: You won’t find startups on the Dividend Kings list, or any companies that are still finding their financial footing, for that matter. Most early-stage companies spend time reinvesting their profits back into their business in order to grow. Not the Dividend Kings. They have well-established growth and can use that leverage to reward their investors. A Dividend King’s willingness to issue dividends shows financial strength, health and stability, not to mention shows a powerful commitment to its shareholders.
- Recession and pandemic resistant: The Dividend Kings offer a shield against stock market fluctuations and economic downturns. In fact, they may do more than just maintain payouts during market downturns — they may actually outperform the broader market. One of the best parts of owning a little slice of a Dividend King is that you’re rewarded your dividends whether the stock price goes up or down, meaning that you don’t have to be fearful of decreases in the stock market or with that company’s stock.
- Passive opportunities: Investing in dividend-paying stocks means that you have the opportunity to earn money in your sleep. It’s one of the oldest financially passive investing methods to help you generate steady cash flow as part of a diversified investment portfolio.
- Potential lower tax rate: With any dividend stock, income gains may be taxed at a lower rate similar to the long-term capital gains rate. In other words, if you hold the stock for a specified length of time prior to the ex-dividend date, your dividends will be considered qualified dividends. This means that instead of taxing gains as ordinary income, they will be taxed at a lower rate.
- Allow for compounding: When dividend stocks kings raise their dividend increases year over year, even smaller yields will grow, multiplying in ways you might not even be able to imagine. This means that living off of dividend payments can be a great retirement plan — and it’s one that has been trending for a long time.
There are many other positive characteristics of Dividend Kings stocks but it’s a great idea to do your own research before you decide whether you want to get into dividend investing, including investing in Dividend Kings stocks.
List of Dividend Kings Stocks for 2022
Here’s a list of the Dividend Kings for 2022, including the company, sector and the number of consecutive years of dividend increases.
- American States Water (NYSE: AWR): Utilities sector, 67 years of dividend increases
- Dover Corporation (NYSE: DOV): Industrials sector, 66 years of dividend increases
- Northwest Natural Holding (NYSE: NWN): Utilities sector, 66 years of dividend increases
- Genuine Parts (NYSE: GPC): Consumer cyclical sector, 66 years of dividend increases
- Emerson Electric (NYSE: EMR): Industrials sector, 65 years of dividend increases
- Procter & Gamble (NYSE: PG): Consumer defensive sector, 65 years of dividend increases
- Parker-Hannifin (NYSE: PH): Industrials sector, 65 years of dividend increases
- 3M (NYSE: MMM): Industrials sector, 64 years of dividend increases
- Cincinnati Financial Co. (NASDAQ: CINF): Financial services sector, 62 years of dividend increases
- The Coca-Cola Company (NYSE: KO): Consumer defensive sector, 60 years of dividend increases
- Colgate-Palmolive (NYSE: CL): Consumer defensive sector, 60 years of dividend increases
- Johnson & Johnson (NYSE: JNJ): Health care sector, 59 years of dividend increases
- Lowe's (NYSE: LOW): Consumer cyclical sector, 59 years of dividend increases
- Lancaster Colony (NASDAQ: LANC): Consumer defensive sector, 59 years of dividend increases
- Nordson (NASDAQ: NDSN): Industrials sector, 58 years of dividend increases
- Farmers & Merchants Bancorp (OTC: FMCB): Financial services sector, 58 years of dividend increases
- Hormel Foods (NYSE: HRL): Consumer defensive sector, 56 years of dividend increases
- California Water Service Group (NYSE:CWT): Utilities sector, 55 years of dividend increases
- Stepan (NYSE: SCL): Basic materials sector, 55 years of dividend increases
- Stanley Black & Decker (NYSE: SWK): Industrials sector, 54 years of dividend increases
- Federal Realty Investment Trust (NYSE: FRT): Real estate sector, 54 years of dividend increases
- SJW Group (NYSE: SJW): Utilities sector, 54 years of dividend increases
- Commerce Bancshares (NASDAQ: CBSH): Financial services sector, 54 years of dividend increases
- ABM Industries (NYSE: ABM): Industrials sector, 54 years of dividend increases
- Sysco (NYSE: SYY): Consumer defensive sector, 52 years of dividend increases
- H.B. Fuller (NYSE: FUL): Basic materials sector, 52 years of dividend increases
- Altria Group (NYSE: MO): Consumer defensive sector, 52 years of dividend increases
- Black Hills Corp. (NYSE: BKH): Utilities sector, 51 years of dividend increases
- National Fuel Gas (NYSE: NFG): Energy sector, 51 years of dividend increases
- Universal Corporation (NYSE: UVV): Consumer defensive sector, 51 years of dividend increases
- W.W. Grainger (NYSE: GWW): Industrials sector, 50 years of dividend increases
- PPG Industries (NYSE: PPG): Materials sector, 50 years of dividend increases
- Target (NYSE: TGT): Consumer defensive sector, 50 years of dividend increases
- Abbott Labs (NYSE: ABT): Health care sector, 50 years of dividend increases
- AbbVie (NYSE: ABBV): Health care sector, 50 years of dividend increases
- Becton, Dickinson & Co.(NYSE: BDX): Health care sector, 50 years of dividend increases
- Kimberly-Clark (NYSE: KMB): Consumer staples sector, 50 years of dividend increases
- MSA Safety (NYSE: MSA): Industrials sector, 50 years of dividend increases
- Tennant (NYSE: TNC): Industrials sector, 50 years of dividend increases
Dividend Kings vs. Dividend Aristocrats
You may have also heard of the Dividend Aristocrats, but what are those? These are companies that also have a long history of increasing dividends. They are also solid companies with a solid track record. The major difference between the two is the length of time in which each type company has increased its dividends. To qualify, Dividend Kings must have increased their dividends for at least 50 consecutive years, while the Dividend Aristocrats qualify by having increased their dividend over the last 25 years.
Dividend Kings ETFs
If you’re not comfortable dumping your money into one company (it’s more risky to do so because you’re putting all your eggs in one basket), you may consider investing in an exchange-traded fund (ETF) instead. An ETF is a fund that tracks an underlying index. One of the biggest perks that you have at your disposal with an ETF has to do with diversification. Instead of investing in one Dividend King, you put your money into a portfolio and invest in a large number of securities at once. Like individual stocks, ETFs can also be traded throughout the day on an exchange.
For example, let’s say you want to invest in 3M, one of the Dividend Kings, but don’t want to only invest in 3M. You can invest in a basket of securities that might make up a wide number of Dividend Kings, such as Sysco, Altria Group, PPG Industries and more, which spreads out risk.
Take a look at a few low-cost ETFs that track dividends, among them, the Aristocrats as well as the Dividend Kings:
Should You Invest in Dividend King Companies?
So, should you invest in a king of dividend stocks? Before you can answer that question for yourself, it’s important to consider your goals and investment time horizon. What do you want to get out of your investment? Consistent payouts? A way to live off the money in retirement?
You’ll also want to put your math skills to good use and examine some valuation metrics before you invest. For example, you may want to determine the dividend yield of companies. The dividend yield can be found by dividing the share price by the annual dividend per share.
However, it’s important to consider other factors, such as company debt, the ability of a company to increase its dividends, as well as the payout ratio, so you don’t find yourself in a dividend yield trap. For example, a company might give too much of its profit to shareholders instead of reinvesting because it’s not investing in growth potential. (This is less risky with Dividend Kings because they are such solid companies, but is a good reminder for dividend investing in general.)
The dividend payout ratio refers to the ratio of a company’s earnings that it applies to a dividend. The payout ratio should be sustainable over time. Here’s an example: If a company earns $10 million and pays out $1 million in dividends, its payout ratio is 10%.
Among the Dividend Kings, the lowest dividend payout ratio is 28% and the highest is 80% with the average being 54%, according to MarketBeat.
About Melissa Brock
While working in college admission, Melissa Brock pursued a freelance writing and editing career. She currently works as a full-time freelance writer and financial editor covering higher education, investing, personal finance, mortgages, college savings, insurance, and more.
She developed her website, College Money Tips
, to help families navigate the college journey. She connects with a wide-reaching audience through her site, through an upcoming digital course, and the myriad of publications for which she writes. Melissa graduated summa cum laude with a bachelor of arts in communication studies with minors in psychology and Spanish from Central College. She's a longtime member of the National Association of College Admission Counseling (NACAC).