Smart investors know that you want to make your money work for you over the long term. One way to do this is to generate passive income through dividend stocks. These stocks can provide a consistent source of income through their quarterly (sometimes monthly) dividend payouts.

However, not all dividend stocks are created equal. Some have high yields of 10% or more. These stocks can be attractive because of their lucrative payouts, but they come with higher risks.

Other companies are more careful with their dividend payouts and increase them every year like clockwork. These companies tend to have stable businesses, manage their liquidity well, and have more trustworthy dividend payments. Here are three dividend stocks that have been increasing their payouts for 40 years or more.

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1. S&P Global

S&P Global (SPGI 1.86%) operates in a hard-to-penetrate industry, which gives it a huge competitive advantage. The company has increased its dividend payout every year for the past 50 years, providing investors with a modest yield of about 1%.

What makes S&P Global a solid company is its importance to the credit markets. The company assesses the creditworthiness of companies, governments or other entities and gives them a credit rating. This rating can inform banks and investors about the risks associated with lending to these companies so that they can appropriately manage their risk.

It’s not easy to break into the credit ratings business. Established agencies have a long-standing reputation. Strict supervisory and regulatory barriers make entry into the industry even more difficult. According to the Securities and Exchange Commission, S&P Global dominates the credit ratings market with a 50% market share. His nearest competitors, Moody’s Corporation and Fitch Ratings have a market share of 32% and 12%, respectively.

The ratings business has faced some headwinds as fewer companies issue debt amid rising interest rates. The tightening of conditions is hurting S&P Global’s ratings business, but it also has a robust data and analytics business that provides steady cash flow. Its diverse income base and long history of cash management make S&P Global a solid dividend stock over the long term.

2. Cincinnati Financial

Cincinnati Financial (CINF 0.99%) writes insurance policies that are an excellent source of reliable cash flows. The property and casualty insurer benefits from constant demand for its products, regardless of economic developments. It can adapt to rising costs and adjust premiums while carefully considering what risks it is willing to take. The stable business has provided investors with a dividend that has increased every year for 62 years and currently yields 3%.

The insurance industry is highly competitive, and the best companies balance risk and reward and consistently write profitable policies. Cincinnati Financial has done a solid job of outperforming the industry average in profitability over the past 21 years. This period included a difficult period from 2008 to 2011, during which profitability declined. The company continued to increase its payout during this period to maintain its impressive dividend streak – a testament to its balance sheet management.

The insurer has increased its payout during the last nine recessions. Thanks to its impressive track record, Cincinnati Financial is an all-weather dividend stock you can rely on.

3. Aflac

Aflac (AFL 0.61%) provides life insurance and additional health insurance to customers in the United States and Japan. Because people don’t want a health crisis to ruin them financially, businesses and individuals are turning to insurers like Aflac to protect themselves from life’s uncertainties. This stable business model is why Aflac has increased its dividend payout every year for 41 years. It also provides investors with an annual return of 2%.

Things haven’t always been smooth sailing for Aflac. When the pandemic hit in 2020, life insurers felt the pressure from all sides. Millions of people lost their jobs and with them their social benefits. In addition, the entire life insurance industry was also faced with increased claims costs.

The last few years have been improving for Aflac. Its claims costs have fallen, it has added new products and it is benefiting from higher interest rates. This year, its net investment income is up 6.7% and should continue to benefit as the company reinvests its cash flows into higher-yielding assets. Aflac’s strong capital position and excellent cash management make it another trustworthy dividend stock for your diverse portfolio.

Last word

Companies that increase their dividend payouts can be an excellent source of reliable dividends. However, like all investments, they are not without risks. Things could impact companies, forcing them to cut their payouts unexpectedly. This is why it’s important to diversify across different stocks, even if you feel like you can reasonably trust a stock.

Still, these three stocks have solid businesses and a history of dividend increases, making them attractive stocks that offer passive income as part of a diversified stock portfolio.

Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Moody’s and S&P Global. The Motley Fool recommends Aflac. The Motley Fool has a disclosure policy.

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