When on the hunt for dividend stocks, there are many factors to consider. You have to look for more than just high yield. Oftentimes, the high yields on dividend stocks simply aren’t sustainable for business reasons, or perhaps because the business is getting super-cheap debt to run its business. Interest rates will rise one day.
Another thing to look for is how long a stock has been paying its dividend. Companies that have been throwing cash back at shareholders for a long time are likely to continue doing so, and these are the dividend stocks to pay attention to. The more obscure ones, usually with boring names, are another place to look because they may be underfollowed, and possibly undervalued.
Here are three dividend stocks that have been paying out for decades:
WGL Holdings (WGL)
Have you ever heard of WGL Holdings (WGL)? Probably not, and that’s actually a good thing. This is the kind of energy play I like because it’s highly diversified. For starters, WGL stock owns natural gas storage facilities — not the gas itself in these cases, but the storage and pipeline delivery infrastructure. Those facilities allow the company to store stuff for other people. That’s a nice margin business.
WGL does actually sell retail natural gas as well, though. On the commercial side, it provides maintenance and upgrades to energy infrastructure and also plays in that designing and building of energy efficiency systems. It has a broad expanse — almost 700 miles of transmission pipe, almost 13,000 miles to distribute, and it can store about 15 million gallons of propane.
WGL serves about 170,000 customers in the Mid-Atlantic. So as you can see, it’s a broadly diversified dividend stock, and that’s one reason it has paid a dividend for 37 years. The dividend yield for WGL stock is presently at 4.4%.
Middlesex Water Company (MSEX)
In a similar vein is Middlesex Water Company (MSEX). Some of the best dividend stocks are utility-based businesses that operate efficiently and generate a lot of cash flow for dividends.
I particularly love that MSEX is a niche business and has been around since 1897. MSEX stock’s niche is geographical — operating only in New Jersey, Delaware, and Pennsylvania. It basically treats wastewater and then distributes it on both the wholesale and retail levels.
This isn’t some massive utility service generation billions. As dividend stocks go, it’s a nice, simple business that makes a few million in free cash flow every year and distributes most of it to shareholders as a 3.7% yield … and has been doing so for 41 years.
Universal Corporation (UVV)
Everyone’s heard of the big tobacco companies like Altria (MO), but did you ever wonder who actually sells the tobacco leaves to the big tobacco manufacturers? I love the distribution business and that’s why I love Universal Corporation (UVV).
UVV has been around since 1888, if you can believe it. The company is universal and seems to have escaped the wrath of non-smoking advocates, as it operates in 30 countries. The company does it all — it buys up tobacco from farmers, processes it, packs it, stores it, before ultimately selling it off to the big boys. Determined not to be left behind, UVV is also monkeying with liquid tobacco to serve the e-cigarette market.
Like energy, tobacco isn’t going away. There will always be a market to serve. It is also, yes, a duopoly and we love duopolies in dividend stock investing. The UVV stock dividend has been solid for forty years, and presently yields 3.9%.
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As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at [email protected] and follow his tweets at @ichabodscranium.