The 2 Best Dividend Stocks to Buy Now and Hold Forever

The market has been volatile since the start of the U.S.-Israel and Iran war. This year through March 13, the S&P 500 index has dropped 3.1%.

That may have some people on edge. But investing in consistent dividend-paying stocks over the long haul is a good way to counteract the market's ups and downs.

Colgate-Palmolive (NYSE: CL) and American States Water (NYSE: AWR) top my list. In fact, they have each raised dividends annually for more than 50 years. Those that have built this impressive track record belong to a special group of companies called Dividend Kings.

Looking ahead, these two kings are the quintessential long-term equity holdings for dividend-seeking investors.

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1. Colgate-Palmolive

Colgate-Palmolive has paid a dividend since 1895. Even better, the company recently announced it would raise the quarterly payout by a penny to $0.53, making it 63 straight years with an increase.

Colgate-Palmolive generates most of its sales from its oral, personal, and home care division. The company sells everyday items like toothbrushes, toothpaste, soap, deodorant, dishwashing detergents, and household cleaners. It has a stable of popular brands, including Colgate, Irish Spring, Palmolive, Speed Stick, and Ajax, that command high market shares.

This kind of dependable business produces plenty of free cash flow (FCF), or operating cash flow minus capital expenditures, allowing the company to easily afford the dividend payouts. Colgate-Palmolive generated FCF of $3.6 billion. That gave the company plenty of cushion to pay the $1.8 billion in dividends.

At the new dividend rate, Colgate-Palmolive's stock has a 2.4% dividend yield. That's about double the S&P 500's 1.2% yield.

2. American States Water

American States Water has paid a dividend since 1931. It's also built an impressive history of raising payouts annually, doing so for 71 straight years. Last July, the board of directors announced that it was increasing the quarterly payout by 8.3% to $0.504 a share. Given its history, investors can reasonably expect the company to announce another dividend increase soon.

The company operates a utility, one of the most reliable businesses. That's because, as a regulated utility, it has a monopoly over water and electricity in California and certain U.S. military bases.

With stable results, earnings easily covered American States Water's dividends. It has a payout ratio, or dividends by profit, of 58%.

The company's stock has a 2.7% dividend yield, about 1.5 percentage points more than the overall market, as measured by the S&P 500.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Colgate-Palmolive. The Motley Fool has a disclosure policy.