2 Magnificent Dividend Kings Down 19% and 32% to Buy in 2025

Today's Dividends Kings are a who's-who of the most successful dividend growth stocks of our time. This list consists of about 50 publicly traded companies that have increased their dividend payments annually for a minimum of half a century.

Typically, most Dividend Kings hold payout ratios above 50%, meaning that they pay out the majority of their net income to shareholders via dividends. While this is great for existing shareholders, it doesn't leave as much room for dividend growth for prospective shareholders, as there is little wiggle room for any meaningful future increases.

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Two Dividend Kings buck this trend, however.

With payout ratios of only 20% and 28%, Tennant Co. (NYSE: TNC) and MSA Safety (NYSE: MSA) offer investors more passive income potential than their Dividend King peers. These low payout ratios mean each company could theoretically triple its dividend and still have leftover funding.

Best yet for investors, despite these steady businesses being leaders in their respective niches, their share prices have slid 19% and 32% from all-time highs.

Following this decline, these Dividend Kings' resilient operations and passive income potential are too promising to pass up at today's price. Here's the investment thesis for each company.

Tennant: Bringing artificial intelligence to the mechanized cleaning

Tennant holds a leading 14% market share of the mechanized cleaning equipment industry. The company sells scrubbers, sweepers, pressure washers, vacuums, and aftermarket parts and services to keep their customers' cleaning equipment humming.

However, while these products helped Tennant become a Dividend King over the last 50-plus years, the company's investment thesis today hinges upon the success of its most recent wave of innovation: autonomous mobile robots (AMRs).

These AMRs multiply customers' labor productivity and could propel the company's stock to new heights.

Image source: Tennant Investor Presentation November 2024.

Between 2018 and 2023, Tennant sold roughly 6,500 earlier versions of its AMRs.

In just the first nine months of 2024, though, the company had sold 2,200 AMRs, powered by the launch of its newest product, the X4 ROVR. Thanks to this acceleration in growth, AMR equipment now equals roughly 5% of Tennant's sales.

In addition to faster revenue growth, these new X4 ROVR sales offer investors the potential for higher margins thanks to the software subscription included with the AMR.

Since launching its first AMR product in 2018, Tennant's profitability has steadily (and vastly) improved.

TNC Operating and Net Profit Margin (TTM) data by YCharts

Though Tennant's new AMR sales will cannibalize some of its less tech-dense cleaning equipment, these newer AMRs (and their software subscriptions) should help continue propelling the company's margins to new heights.

Fueled by this rising profitability -- and the fact Tennant only uses 20% of its net income to fund its 1.4% dividend yield -- the potential for further dividend increases is plain to see.

Management expects to grow sales by 4% over the long term as its AI-powered products become more prominent. With Tennant's stock currently trading at just 13 times next year's earnings, the company's leadership position (in market share and innovation), improving margins, and dividend growth potential make it a Dividend King to buy in 2025.

MSA Safety: Safely exceeding the market's returns

MSA Safety holds the No. 1 or No. 2 market share position across a number of safety niches. Powered by this top-dog status, MSA Safety has delivered 40-bagger returns since 2000, increasing its dividend annually as it went.

To get a better idea of what exactly MSA does, here are the products it sells in each of its business segments:

• Fire service (39% of sales): Consists of self-contained breathing apparatuses, protective clothing gear, boots, and helmets
• Detection (36% of sales): Products to detect and identify fixed gas and flames, portable gases, and refrigerants
• Industrial personal protective equipment (25% of sales): Includes air-purifying respirators, industrial head protection, and fall protection gear

The beauty of these products for investors (aside from their life-saving purposes in the real world) is that each segment's products are entirely non-discretionary. Fighting fires, detecting gas leaks, and keeping industrial workers safe are three things that will not go away anytime soon -- if ever.

This essential nature of MSA Safety's equipment explains the company's incredible returns and ascension to Dividend King status.

However, the best could still be ahead for the company. Leaning into more connectivity-focused solutions, such as its FireGrid cloud platform and its ALTAIR portable gas detection system, MSA's operating margins are starting to look more "software-like."

MSA Operating Margin (TTM) data by YCharts

Pairing safety standards that will only grow more strict with time worldwide with the ongoing evolution of the Internet of Things, it is clear to see that MSA operates at the heart of two key trends.

If its profitability continues to expand, the company could offer investors a lot of passive income potential. This is especially true as MSA only uses 28% of its net income to fund its 1.2% dividend yield despite growing its payouts every year for half a century.

MSA probably won't deliver high-end sales growth, with management guiding for 4% annualized organic growth through 2028. However, trading at just 20 times next year's earnings, the company's budding profitability and leadership positioning across its array of essential products make it another magnificent Dividend King to hold for decades.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool recommends Tennant. The Motley Fool has a disclosure policy.