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These 3 Dividend Payers Are Forever Stocks, Even if the Market Crumbles

Famed investor Warren Buffett has quipped that his favorite holding period is forever. However, not all stocks have the characteristics of a forever holding. Many companies don't have the durable business models and financial profiles needed to continue making money during periods of severe market turmoil.

Black Hills Corporation (NYSE: BKH), Enbridge (NYSE: ENB), and American States Water (NYSE: AWR), on the other hand, stand out to a few Fool.com contributors for their ability to continue thriving in tough times. They have demonstrated that by continuing to increase their dividends over the decades. With more growth ahead, they're great dividend stocks to buy and hold for what could be a lifetime of income.

Black Hills: Rising rates have created a Dividend King bargain

Reuben Gregg Brewer (Black Hills Corporation): When it comes to utilities, Black Hills is a small fry, with a roughly $3.6 billion market cap. That said, it is a giant when it comes to dividends, given that it has achieved Dividend King status with 54 years of annual dividend increases under its belt. The 4.8% dividend yield, meanwhile, is near 10-year highs and well above the utility average of around 3.3%, using Vanguard Utilities ETF as a proxy.

The reason for the relatively high yield is largely rising interest rates, which will increase costs for Black Hills. The company has more leverage than some of the industry's largest players. That's not exactly a new trend, so this isn't a situation where investment grade rated Black Hills has somehow gotten itself in trouble. Still, management has been working on reducing leverage and there's likely to be some near-term earnings pressure.

If you can get past the near-term headwinds, however, there's material long-term promise in the fact that Black Hills' customer growth is running nearly three times higher than U.S. population growth. That means that regulators will be incentivized to provide attractive rate and investment decisions to ensure that Black Hills' customers have reliable access to power.

If you act now, you can buy a Dividend King with a boring, reliable business while it has a historically high yield. And, equally important, the business growth opportunity here will remain even if the market craters, because power is the lifeblood of modern society.

Built for whatever the future holds

Matt DiLallo (Enbridge): Enbridge has been one of the most reliable companies in the energy sector. The Canadian pipeline and utility company has delivered 18 consecutive years of achieving its annual financial guidance. It has delivered against its objectives amid a financial crisis, commodity price collapse, and global pandemic.

The company's low-risk cash flow profile is a big driver of its consistency. Enbridge gets 98% of its earnings from stable cost-of-service or contracted assets. It has steadily worked to enhance the stability of its cash flow by investing in assets that generate low-risk cash flow. For example, it's in the process of buying three natural gas utilities from Dominion to further enhance the durability of its cash flow.

Enbridge has also worked hard to increase the long-term sustainability of its cash flows by steadily shifting its earnings mix from oil to lower-carbon energy, which is to say natural gas and renewables. It expects lower-carbon energy to supply about half its earnings this year, driven by its gas utility acquisitions and investments in gas pipelines and renewable energy. That steady shift should continue in the future, powered by Enbridge's massive and growing backlog of primarily lower-carbon infrastructure projects.

Those projects provide Enbridge with very visible growth. It expects its cash flow per share to grow by around 3% annually through 2026 before accelerating to 5% per year over the medium term as some modest near-term tax legislation headwinds fade. That should give the company the fuel to continue increasing its dividend, extending a tradition it has kept for 29 straight years.

Enbridge currently offers a 7.5% dividend yield, giving investors a strong base return. When factoring in earnings growth, Enbridge could continue to deliver a total shareholder return in the low double digits. The company's low-risk profile and solid total return potential make it an ideal stock to buy and hold for the very long term.

A no-brainer dividend growth stock to own

Neha Chamaria (American States Water): American States Water is perhaps the finest example of a forever dividend stock. The water stock is a Dividend King, which means it has consistently increased its dividends for at least 50 consecutive years. However, American States Water also boasts the longest dividend growth streak among the 55 Dividend Kings, having raised its dividend payout for 69 consecutive years now.

Moreover, if you think a boring water utility's dividend growth will likely be unimpressive, consider that American States Water's quarterly dividend has grown at a solid compound annual growth rate (CAGR) of 9.4% in the past five years. The company is targeting a dividend CAGR of at least 7% in the long term.

So what makes American States Water such a reliable dividend stock? As a utility that supplies an essential commodity like water, the company's cash flows are regulated and therefore as stable as they can get. American States Water is one of the largest water utilities in the U.S., serving more than 1 million people in nine states. At the same time, the company also provides contracted water services to military bases under 50-year contracts. Over the years, American States Water's earnings per share have grown steadily, and so have dividends. This chart shows its earnings and dividend growth over the past twenty years, as well as the stock's total returns over the period. As evidenced dividends have played a massive role in driving the stock's returns over time.

AWR Chart

AWR data by YCharts

American States Water stock may be a low-yield stock – it currently yields 2.5% -- but the preceding chart proves how rewarding even a low-yielding boring dividend stock can be if it can pay and grow dividends consistently over time. So if you're looking to buy a dividend stock that won't let you down even if the market crumbles, American States Water is a no-brainer pick.

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Matt DiLallo has positions in Enbridge. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Black Hills, Dominion Energy, and Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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