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Written by Sean Williams for The Motley Fool
Statistically, dividend stocks have more than doubled the average annual return of non-payers over the previous 52 years.
The stock market’s income superstar has paid a continuous dividend for 210 years and has raised its base annual payout for the last 29 years (and counting).
A highly predictable (and regulated) operating model, coupled with a steady diet of bolt-on acquisitions, powers this consistent payout.
For more than a century, the stock market has been one of the world's greatest wealth creators. With thousands of publicly traded companies and exchange-traded funds to choose from, there is no shortage of strategies for investors to grow their wealth. However, buying and holding high-quality dividend stocks is often one of the savviest strategies.
In "The Power of Dividends: Past, Present, and Future," Hartford Funds, in collaboration with Ned Davis Research, found that dividend payers crushed non-payers on an annualized return basis over the last 52 years (1973-2025): 9.2% vs. 4.21%. Consistency is key when investing in dividend stocks – and no company has been delivering the goods longer for income seekers than little-known water utility, York Water (NASDAQ:YORW).
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If the York Water name doesn't ring a bell, you're not alone. I'd wager 99% of investors have never heard of it until now. That's because it operates as a water and wastewater services provider for 58 municipalities covering four counties in South-Central Pennsylvania. Its 214,000 customers are a drop in the bucket next to the U.S. population.
It's also an off-the-radar stock. It averages a mere 141,500 shares traded per day and sports a relatively small $503 million market cap.
But what York Water lacks in size and daily trading volume, it more than makes up for in dividend consistency.
York has paid a continuous dividend since its founding in 1816. That's 210 consecutive years of dividend payments, covering the terms of all but three U.S. presidents and standing 60 years longer than the next-closest company in terms of continuous payouts, Stanley Black & Decker (NYSE:SWK). It's also in the midst of a 29-year streak of raising its base annual dividend.
One reason York Water delivers year after year for its investors is the predictability of its operating model. Demand for water and wastewater services doesn't change much from one year to the next, yielding predictable cash flow.
Additionally, water utilities usually operate as monopolies in the areas they service. Given the high costs of water and wastewater infrastructure, York doesn't have to worry about losing its customers to competitors.
However, its clearest advantage is that it's a regulated utility. On the one hand, this means York can't raise its customers' rates without approval from the Pennsylvania Public Utility Commission (PPUC). While this might sound like bad news, it actually protects the company from unpredictable wholesale pricing.
Furthermore, the PPUC has a history of granting York meaningful rate increases to offset the costs of infrastructure upgrades. In February, the PPUC granted York's rate-hike request, which is expected to boost its annual revenue by $18.85 million, or 24%, based on its full-year revenue from last year.
Wall Street's greatest dividend stock is also known for its bolt-on acquisitions. Adding water and wastewater customers to its highly predictable operating model boosts its earnings potential over time.
Lastly, York Water hasn't been this cheap in over a decade. Its forward price-to-earnings (P/E) ratio of 17.5 is a 40% discount to its average forward P/E ratio over the previous five years.
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Sean Williams has positions in York Water. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.