We recently compiled a list of the Dividend Kings List: Top 15. In this article, we’re going to take a look at where Consolidated Edison, Inc. (NYSE:ED) stands against other dividend kings you should know about.
The Dividend Kings are a distinguished group of companies that have achieved at least 50 consecutive years of dividend increases. While some of these companies are part of the S&P index, the two categories do not completely overlap. The appeal of dividend kings became especially clear after the disruptions caused by the COVID-19 pandemic in 2020. During this time, numerous companies reduced or suspended their dividends, leaving income-focused investors disappointed. Many had assumed that dividend-paying stocks were inherently lower risk, only to face sharp declines in share price along with cuts in payouts. However, Dividend Kings stands out for its remarkable consistency, with 50 years of uninterrupted dividend increases. This long history of reliable payments provides a sense of stability, even in volatile market conditions.
Investors often gravitate toward companies with a history of consistent dividend growth, as such companies tend to perform well in declining or stagnant markets. Even during periods of strong market performance, dividend producers have captured a significant portion of the profits. Following a long-term dividend growth strategy can help increase returns for investors. A report from T. Rowe Price highlighted that between 1985 and 2022, companies in the Russell index that consistently increased dividends outperformed the broader benchmark index. Additionally, these companies showed lower price volatility compared to the broader market.
Earning income through dividend stocks is a gradual process that requires patience and a commitment to long-term investing. These stocks are particularly suitable for investors with a long-term horizon, as they have consistently outperformed inflation over time. According to data from Morningstar and Robert Shiller of Yale University, since 1871, market dividends per share have grown at an annualized rate 1.6 percentage points faster than inflation. Furthermore, the gap between dividend growth and inflation has widened in recent years. Over the past 50 years, dividends have outpaced inflation by 2.5 percentage points a year, and over the past 20 years, the spread has grown to 4.6 percentage points a year.
During market rallies, stocks that grow dividends can underperform as investor enthusiasm and momentum often take precedence over fundamentals like valuation and business quality. This trend has been especially notable in the recent past, with dividend stocks lagging the broader market. However, maintaining a long-term strategy focused on dividend growth can be advantageous, as benefits accumulate over time with each increase in payouts. Companies with strong fundamentals and strong financial stability are typically well positioned to sustain and grow their dividends. In contrast, smaller or emerging companies often prioritize reinvesting profits in their operations to drive growth. With this in mind, we’ll take a look at some of the best dividend kings with the highest yields.