FX168 Financial News (North America) News Wall Street has been above all asset classes for the past century. Although treasury bonds, real estate, and commodities such as gold, silver, and oil have had their best moments and in many cases made investors richer, no asset class can match the average annual return of stocks over the past century.

One of the best aspects of investing on Wall Street is that there are thousands of publicly traded companies and exchange-traded funds (ETFs) to choose from. It's almost certain that there will always be securities that meet your risk tolerance and/or investment goals. However, among the myriad ways to make money in the stock market, several strategies are more stable and successful than buying and holding good dividend stocks.

Last year, Hartford Funds' investment advisors released a detailed report praising the merits and superior performance of dividend stocks. “The Power of Dividends: Past, Present, and Future” (The Power of Dividends: Past, Present, and Future) compares the performance of dividend-paying stocks and non-paying stocks over the past half century.

According to the report, dividend stocks had an average annual return of 9.17% between 1973 and 2023, and the volatility was 6% lower than the benchmark S&P 500 index. At the same time, listed companies that did not pay dividends had an annualized return of only 4.27% over the same 50-year period, and their average volatility was 18% higher than that of the S&P 500 Index.

Companies that regularly share part of their profits with investors — even if these payments don't necessarily grow every year — are often enduring, time-tested companies, and can often provide transparent long-term growth prospects. Simply put, these are companies that investors expect to increase in value over time.

Wall Street has so many amazing dividend stocks to choose from

Although there are currently over 1,000 shares that pay dividends to shareholders, no two income stocks are exactly the same. When it comes to consistency and security, some dividend stocks naturally stand out.

A great example is consumer goods giant Coca Cola (NYSE: KO). In February, it raised its quarterly dividend for the 62nd year in a row. Furthermore, since 1920, the company has continued to pay dividends without interruption.

Coca-Cola's secret to success isn't really a secret. It provides basic necessities (drinks), which people buy regardless of the financial situation, and its business is spread over a wide geographical area, covering almost all countries.

Coca Cola also has a strong brand influence. Kantar's annual “Brand Footprint” (Brand Footprint) report ranked Coca Cola as the most popular brand among consumers for 12 consecutive years.

Healthcare Group Johnson & Johnson (NYSE: JNJ) is another top dividend stock that provides safe, predictable revenue every year. In April, Johnson & Johnson's board raised its base year dividend to 62 years.

No matter what happens in the US or the global economy or stock market, people will still get sick and need medical care. This means that demand for new drugs and medical devices will continue to be stable, leading to transparent and predictable operating cash flows.

Johnson & Johnson is also one of only two listed companies that still hold Standard & Poor's (S&P)'s extremely valuable AAA credit rating. This rating is one level higher than the US government's rating and shows S&P's strong trust in Johnson & Johnson to meet and repay its outstanding debts.

But at the end of the day, neither Coca Cola, Johnson & Johnson, nor more than 1,000 other dividend stocks can compare to a small, little-known company, and are unrivaled in terms of dividend safety and consistency.

Meet Wall Street's greatest (and most underrated) dividend stocks

The mysterious stock considered the safest and most stable dividend payer is York Water (NASDAQ: YORW), a $0.548 billion water and sewage treatment company serving 56 municipalities in four south-central Pennsylvania counties.

It's no surprise that York Water is underrated. Over the past three months, its average daily trading volume was only 58,329 shares. On one day, the company's stock traded slightly more than $2 million. But the humble water company has a rich history of sharing profits with investors.

Since the founding of York Water in 1816, the company has been paying dividends to shareholders. Although the company doesn't increase dividends every year like Coca Cola and Johnson & Johnson, its 2008 continuous dividend record is exactly double Coca Cola's 104 record. According to Wall Street analysts' research, York's record for consecutive dividends is 60 years longer than the next closest continuous payment record for US listed company Stanley Black & Decker.

The reason for the safety of York dividends can be traced back to four factors

First, water and sewage treatment are basic necessities. Everyone needs these services whether they own or rent a property. Furthermore, demand for water and sewage services does not change much from year to year, leading to a highly predictable operating cash flow.

Second, the entry threshold for utilities is usually very high. Most utilities operate as a monopoly or duopoly within the region they serve, meaning consumers have few opportunities to choose the company that provides the service. Since initial infrastructure costs are often high, York Water doesn't have to worry about customer competition. This also results in transparent and predictable cash flows.

Third, an important factor in York's success is that it is a regulated water company. A “regulated” utility must first obtain approval from the state Public Utilities Commission (in this case the Pennsylvania Public Utilities Commission, PPUC) to increase customer charges. While this may sound inconvenient, it ensures that York doesn't have to deal with fluctuating wholesale prices for services.

In January 2023, PPUC approved York to raise fees for approximately 75,000 customers to offset $0.176 billion in system improvements and infrastructure replacement costs. York's annual revenue increased 18% last year after this price increase.

Finally, York Water has never been stingy when it comes to expanding the scope of its business. Steady profit growth and mergers and acquisitions have ensured York can maintain its continuous dividend record.

While some investors may criticize York for “only” 2.2% dividend, keep in mind that the dividend yield is a function of the share price. Although quarterly payments have increased 164% since the beginning of the century, York's stock price has risen 573% over the same period. In other words, York's lower dividend yield is simply due to a significant increase in its share price. This should not be a reason for shareholders to complain.

Although investors can find many stocks with dividend yields higher than York Water, investors won't find a company that is more stable or secure in terms of dividend payment records.