The most prominent of the dividend growth stocks are the Dividend Kings; they have increased their dividends for a minimum of 50 consecutive years; here's a look at three that are not often considered by investors, explains Prakash Kolli, editor of Dividend Power.

Northwest Natural Holding Company (NWN) is one of the smaller natural gas utilities. The company was founded in 1859. It has a market cap of ~$1.69 billion. Besides natural gas, Northwest Natural has a minor water and wastewater segment.

The utility serves about 786,000 natural gas customers in Oregon and Southwest Washington and roughly 80,000 water services customers in the Pacific Northwest and Texas. Total revenue was approximately $941 million in the past twelve months.

The utility has a solid dividend yield of ~3.9% amongst the highest of the Dividend Kings. The firm has raised the dividend for an astounding 66 years giving it one of the longest active streaks. However, the growth rate is meager at ~0.94% in the past decade and ~0.53% in the trailing 5-years. As a utility, the payout ratio is on the higher end at roughly 75%.

The stock has performed well during the bear market and is up ~1.4% in 1-year and ~2% year-to-date. The forward P/E ratio is ~19.8X, below the 5-year range and at the lower end of the past ten years. Although the dividend growth rate is low, investors are getting an undervalued stock with a nearly 4% dividend yield.

Tootsie Roll Industries (TR) is well-known for its candy. However, investors tend to ignore the stock, and it is a little-known for its status as a Dividend King. The company produces and sells Tootsie Roll, Charms, Blow-Pops, Dots, Junior Mints, Sugar Daddy, Charleston Chew, Dubble Bubble, etc.

The Chairwoman and CEO, Ellen R. Gordon, owns approximately 53.9% of common stock and 82.8% of Class B shares, effectively giving her company control. Total revenue in the trailing twelve months was about $636.2M. 

Tootsie Roll has a forward dividend yield of about 1%, not high. However, the company pays a 3% stock dividend that investors can sell, giving an effective yield of 4%. The company has a 56-year streak of dividend increases based on the increasing cash returned to investors.

The earnings payout ratio is usually modest, ranging from 35% to 45%. Moreover, the company has a rock-solid balance sheet with a net cash position adding to the dividend safety.

The candy manufacturer is rarely undervalued because of the limited float and family control. As a result, the stock usually trades at an elevated earnings multiple.

The P/E ratio is now ~35.7X within the 5-year and 10-year range. The stock has performed well in 2022 and is down only about 2.6%, but it is up ~17.6% in the past year. Investors desiring a low volatility stock with a 4% yield should look at Tootsie Roll.

Stepan Company (SCL) was founded in 1932. It produces and sells chemicals globally. It operates through three business segments: Surfactants, Polymers, and Specialty Products. Total revenue was $2,639.6 million in the trailing twelve months.

Stepan is not an income stock with a dividend yield of only 1.3%. But this value is at the higher end of its range in the past decade. The company has increased the dividend for 54 years in a row and is currently doing so at about a 10% CAGR in the past five years.

The earnings payout ratio is minimal at 20.3% supporting future increases with excellent dividend safety. The balance sheet has relatively low leverage and high-interest coverage, adding to the dividend’s security.The valuation is low at a P/E ratio of ~15.1X, below the market average and less than the 5-year and 10-year averages.

The stock price is down about 16% year-to-date because investors fear a recession will trigger lower demand for chemicals. Despite the low dividend yield, the good dividend safety, high dividend growth rate, and low valuation make Stepan an excellent stock to consider for total return.

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