Wall Street's Greatest Dividend Stock Just Made History Again -- and 99.9% of Investors Have Never Heard of This Small-Cap Company

For more than a century, Wall Street has been a wealth-building machine for professional and everyday investors. With thousands of publicly traded companies and exchange-traded funds (ETFs) to choose from, it's a near-certainty that one or more securities can help you meet your financial goals.

But among these countless strategies investors can deploy to grow their wealth, few have proved more consistently successful than buying and holding high-quality dividend stocks.

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Companies that pay a regular dividend to their shareholders often have similarities. In no particular order, dividend stocks:

• Tend to be profitable on a recurring basis.
• Have navigated one or more economic downturns and demonstrated that they're operating model is time-tested.
• Can provide transparent long-term growth outlooks.

Image source: Getty Images.

Best of all, companies that pay a regular dividend have handily outperformed nonpayers over the long run.

In The Power of Dividends: Past, Present, and Future, the analysts at Hartford Funds, in collaboration with Ned Davis Research, compared the performance and relative volatility of dividend stocks to nonpayers over a 50-year period (1973-2023). What they found was that dividend stocks ran circles around nonpayers -- 9.17% annualized return vs. 4.27% annualized return -- and did so while being notably less volatile than the benchmark S&P 500. Whereas nonpayers were 18% more volatile than the S&P 500 over a half-century, income stocks were 6% less volatile.

Despite this outperformance, there's more to a great dividend stock than simply offering a payout. While dividend stocks are a dime a dozen, great income stocks are exceedingly rare and not always obvious.

Great dividend stocks are few and far between

Out of the roughly 2,000 publicly traded companies that have paid a dividend over the trailing year, fewer than five dozen qualify as Dividend Kings. A Dividend King is a public company that's increased its base annual payout for at least 50 consecutive years.

For instance, a little more than a week ago, consumer staples juggernaut Coca-Cola (NYSE: KO) announced it would raise its quarterly dividend from $0.485 per share to $0.51. This marked the 63rd consecutive year that Coca-Cola's board has given the green light to increase the company's payout. Selling a basic-need good and having virtually unparalleled geographic diversity has led to highly predictable cash flow and sustainable dividend growth.

In less than two months, it should be a similar story for healthcare conglomerate Johnson & Johnson (NYSE: JNJ), which has increased its base annual dividend for 62 straight years. I expect it to do so again. Johnson & Johnson is one of only two public companies to sport the highest possible credit rating (AAA) from Standard & Poor's, and has benefited immensely from its shift to higher-margin novel-drug development.

An even rarer group of dividend payers than the Dividend Kings are those companies that have made consecutive payouts for more than 100 years. Just over a dozen public companies have paid a continuous dividend for over a century.

Coca-Cola is part of this group, with dividend payments made for 105 consecutive years (and counting). Other well-known brands that belong to this exclusive club are integrated oil and gas giant ExxonMobil (NYSE: XOM) and power tools company Stanley Black & Decker (NYSE: SWK). ExxonMobil has paid a consecutive dividend since 1882, while Stanley Black & Decker has doled out a dividend annually since 1876. Stanley Black & Decker is also a Dividend King, with payouts growing in each of the past 57 years.

Yet among these time-tested income stocks is a little-known small-cap company that just extended its history-making dividend streak.

Image source: Getty Images.

Making dividend history is what this virtually unknown small-cap company does annually

Raise your hand if you've heard of York Water (NASDAQ: YORW) before. It's a water and wastewater utility valued at just $483 million that services 56 municipalities spanning four counties in South-Central Pennsylvania. It's also a company that sees average trading volume of only 63,900 shares per day (about $2.1 million in value changing hands).

I'd be willing to wager that 99.9% of investors have never heard about York Water prior to reading this -- yet it's the greatest dividend stock on Wall Street.

On Jan. 27, York's board of directors declared a quarterly dividend of $0.2192 per share, with a record date of Feb. 28 and a payable date of April 15. This payout marks the 209th consecutive year that York Water will dish out a dividend to its shareholders, which is 60 years longer than the next-closest company (Stanley Black & Decker), in terms of consecutive dividend payments.

How is it possible that York Water has paid an uninterrupted dividend since 1816? For starters, there's the advantage of cash-flow predictability. Demand for water and wastewater services doesn't change much from one year to the next.

To build on this point, most utilities (water, gas, and electric) operate as monopolies or duopolies in the areas they service. Due to the high cost associated with getting infrastructure in place, residential and enterprise customers don't have the option of shopping around for other utility providers. In other words, York Water doesn't have to worry about other utilities siphoning away its customers, which adds to the predictability of its operating cash flow.

York Water is also a regulated water utility. Regulated utilities require permission from state commissions before they can increase rates. Though this might sound like a nuisance, it's an important aspect of York's operating model. Being overseen by the Pennsylvania Public Utility Commission ensures that it won't be exposed to potentially unpredictable pricing.

Another catalyst that explains York's more than two centuries of success is the willingness of its management team to make bolt-on acquisitions. These acquisitions increase the company's customer base and expand its operating cash flow, which allows for increased organic investment and additional bolt-on acquisitions.

Some investors are bound to scoff at York Water's rather pedestrian dividend yield of 2.6%, as of the closing bell on Feb. 25. But keep in mind that yield is a function of payout relative to share price. York has increased its payout for 28 consecutive years (atop its 209-year consecutive dividend streak) and seen its share price rise by nearly 500% since this century began. If not for an almost sextupling in its stock over 25 years, York's yield would be substantially higher.

Inclusive of dividends, York stock has returned 1,060% for shareholders since this century kicked off. It's what makes York Water Wall Street's greatest, yet virtually unknown, dividend stock.

Should you invest $1,000 in York Water right now?

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.