We recently published a list of the 12 Best Dividend Kings to Buy For Safe Dividend Growth. In this article, we are going to take a look at where American States Water Company (NYSE:AWR) stands against other best dividend kings.
The importance of dividend stocks cannot be denied, even in today’s market environment, which is dominated by AI stocks. The S&P Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years, is down by over 4% since the start of 2025, compared with a much harsher decline of 13% in the broader market.
Dividend stocks become increasingly popular when companies grow their payouts regularly. Historically, dividend growth stocks have performed better than their peers and have shown less volatility. The dividend growth track records, backed by solid fundamentals, offer reliable investment options to income investors. According to a report by Nuveen, dividend growth stocks have outperformed other asset classes with less risk. The report revealed that companies with strong dividend growth streaks delivered an annual average return of over 10% between 1973 to 2024, as compared to a 4.2% return of non-dividend paying stocks. During this period, dividend cutters delivered a nearly -2% return.
Though dividend stocks also do not come with a promise and can also fluctuate, these stocks have made significant contributions to the market’s overall return over the decades. According to a report by Hartford Funds, dividends and reinvested dividends represented nearly 40% of the market’s return from 1930 to 2024, with capital appreciation making up the rest. The report also highlighted their significance when the economy was in the trenches. The data mentioned that during the 1940s, 1960s, and 1970s, the total returns were lower than 10%, however, dividends represented a larger portion of the market’s performance.
According to Jerome Powell, inflation in the US is likely to ramp up because of the President’s sweeping tariffs. Here are some comments from Powell:
“We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
While this presents an overall uncertain environment for an investment landscape, dividend investors are in the catbird seat, as dividend stocks have historically been successful in protecting capital against inflation. WisdomTree reported that from 1957 through 2023, dividends have grown by an average of 5.7%, compared with a 3.67% growth in inflation. The report also mentioned that over the past 68 years, dividend payouts have only decreased in six years, and in just one of those years, they dropped by more than 5%. In comparison, stock prices experienced declines in 18 years during the same period, with the worst drop exceeding 40% and an average decline of more than 11%. Stock prices have proven to be more than twice as volatile as the underlying dividend cash flows. This is because market sentiment often causes short-term fluctuations in stock prices, whereas dividend cash flows, which reflect the company’s long-term value, are less volatile. Given this, we will take a look at some of the best dividend kings for safe dividend growth.
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Our Methodology
For this article, we scanned the list of dividend kings, which are the companies that have raised their payouts for 50 years or more. From that list, we picked 12 companies with the highest 5-year annual average dividend growth rates. The stocks are ranked in ascending order of their annual average dividend growth in the past five years.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
American States Water Company (NYSE:AWR)
5-Year Average Annual Dividend Growth Rate: 8.95%
American States Water Company (NYSE:AWR) deals in delivering safe, reliable, and sustainable services and products. Unlike companies in unregulated industries that can adjust prices when they see fit, businesses operating in regulated sectors must first obtain approval from public utility commissions before increasing customer rates. Though this limits its pricing flexibility, the company’s operations come with guaranteed rates of return, offering a level of financial stability. This predictability gives management clearer visibility into future cash flows, which aids in planning for long-term investments, including dividend payments.
In the fourth quarter of 2024, American States Water Company (NYSE:AWR) reported revenue of over $143 million, which showed a 14.3% growth from the same period last year. The company’s Water segment remained the winner with $92.6 million in revenue, up from $86.7 million in the prior-year period.
American States Water Company (NYSE:AWR) is popular among income investors because of its strong dividend history. The company has consistently paid common dividends every year since 1931 and has raised its dividend annually for 70 straight years. From 2019 through 2024, the company’s quarterly dividend has grown at a compound annual growth rate (CAGR) of 8.95%, and its calendar year dividend payments have posted a 10-year CAGR of 8.0% through 2024. AWR’s current long-term goal is to maintain a dividend growth rate of over 7% annually. Its quarterly dividend currently sits at $0.4655 per share for a dividend yield of 2.37%, as of April 4.
Overall, AWR ranks 7th on our list of the best dividend kings for safe dividend growth. While we acknowledge the potential of AWR as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than AWR but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.