3 Dividend Stocks to Buy Now That Have Raised Their Payouts for at Least 40 Consecutive Years

Generating passive income from dividend-paying stocks is a great way to participate in the market without having all the return based on stock prices going up. Companies that steadily grow their payouts increase the passive income generated from an initial investment.

For example, if you buy shares in a company that yields 2% but the dividend doubles over 10 years, your yield on cost is effectively 4%. So, buying and holding quality dividend stocks over time can be an excellent way to grow your passive income stream.

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Sherwin-Williams (NYSE: SHW), McDonald's (NYSE: MCD), and Clorox (NYSE: CLX) have increased their payouts for at least 40 years. Here's why all three dividend stocks are worth buying now.

Image source: Getty Images.

A high-margin cash cow that's worth a premium price

In November, Sherwin-Williams joined Nvidia as the newest components in the Dow Jones Industrial Average. The paint and coating company is being recognized for its consistency and multiple avenues for monetizing its products.

The company sells its products through three segments. Its Paint Stores Group made up 57% of 2024 revenue, the Performance Coatings Group was 29% of sales, and the Consumer Brands Group contributed 14% of sales.

The Paint Stores Group is mostly a U.S. business that directly sells products to a variety of end markets in residential, commercial, property maintenance, and protective marine.

The Performance Coatings Group supplies industrial packaging companies, the automotive industry, and other customers. This segment is more business-to-business in nature than Sherwin-Williams' consumer-facing segments.

The Consumer Brands Group is also majority North America -- selling products under Sherwin-Williams brands such as Valspar and Cabot through channel partners like Lowe's and Menards.

Sherwin-Williams is an attractive long-term investment because it has a diversified business model with three high-margin segments. In 2024, the Paint Stores Group had a 22% adjusted operating margin, while Consumer Brands was 21%, and Performance Coatings was 18%.

Sherwin-Williams' revenue growth has slowed recently, but margins continue to expand. In February, Sherwin-Williams announced its 46th consecutive annual dividend raise -- putting it on track to become a Dividend King by 2029. Dividend Kings are companies that have paid and raised their dividends for at least 50 consecutive years.

Sherwin-Williams isn't the cheapest stock, with a 33.1 price-to-earnings (P/E) ratio. And the yield is only 0.9%. Still, the company is an industry-leading business that may be worth its premium valuation.

An ultra-safe stock for risk-averse investors

McDonald's hit an all-time high in March. It has pulled back a little from that high, but is still up around 8% year to date at the time of this writing -- handily outperforming down years in the major indexes.

Liker Sherwin-Williams, McDonald's has an excellent business model that makes it stand out from the competition. McDonald's makes most of its money from royalties and rent from franchisees -- not from selling food and drinks. Around 95% of restaurants are franchised.

Franchisees benefit from McDonald's global brand, supply chain, and marketing. In exchange, McDonald's receives steady cash flow regardless of sales performance.

The predictability of McDonald's business model has allowed the company to pay a growing dividend for 48 consecutive years and consistently repurchase a ton of shares. Over the last decade, the stock price is up 220%, while the outstanding share count is down over 25%, thanks to buybacks. And the dividend is manageable at a payout ratio under 60% and a yield of 2.3%.

Add it all up, and McDonald's is a well-rounded, safe stock for risk-averse investors looking to generate passive income.

A high-yield dividend stock for income investors

Unlike Sherwin-Williams and McDonald's, Clorox has failed to deliver consistent growth for investors. But the consumer staples conglomerate is undergoing a turnaround that could pay off for long-term investors.

Clorox has an excellent lineup of brands -- from flagship Clorox to Kingsford charcoal, Glad trash bags, Brita water filters and purification systems, Hidden Valley ranch and dressings, Burt's Bees, and more. But the company has struggled to manage its supply chain, control costs, and forecast demand trends.

As the chart shows, Clorox's margins and revenue initially soared during the pandemic, but then margins tumbled, and sales flatlined.

CLX Revenue (TTM) data by YCharts

Clorox has made considerable progress in restoring margins. It has made long-term investments in digital technologies and is transitioning to a cloud-based platform to drive efficiency. Near-term guidance isn't great, but Clorox could be a solid long-term buy for investors who believe the company can get back to growth.

Management is guiding for fiscal 2025 adjusted earnings per share of $6.95 to $7.35 -- giving it an adjusted P/E ratio of just 20.6 based on the midpoint of that guidance. Clorox's fiscal year ends June 30.

The stock has a 3.3% dividend yield, and the company boasts 40 consecutive years of dividend increases. Clorox is a good buy for value investors seeking passive income.

Three top dividend stocks to buy now

Sherwin-Williams, McDonald's, and Clorox may not be the most exciting stocks, but investors can count on all three companies to continue raising their dividends no matter what the economy is doing.

Sherwin-Williams may appeal to investors looking for more exposure to broader economic growth, whereas McDonald's and Clorox are more consumer-facing.

McDonald's is arguably the safest stock on this list, while Clorox has the highest yield and may be the best choice for income investors.

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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Lowe's Companies and Sherwin-Williams. The Motley Fool has a disclosure policy.