These 2 stocks have raised dividends above the inflation rate every year — for 40 years

Two U.S.-listed companies, Air Products & Chemicals , and Automatic Data Processing , are the only stocks worldwide to have raised dividends every year above the rate of inflation for the past four decades, according to a CNBC Pro analysis. Air Products & Chemicals, founded in 1940, produces industrial chemicals and gases and operates in more than 50 countries. The $60 billion company has consistently raised its dividends per share above the U.S. consumer price index each year over the past 40 years. In 2022, when the price levels rose by 8%, Air Products raised its dividend by 8.9%. Similarly, Automatic Data Processing, a payroll and human resources software company, has beaten the inflation rate each year for the past four decades. It raised shareholder payout by 9.5% in the latest financial year. Of about 100,000 stocks worldwide, those are the only two that consistently rewarded their shareholders, according to a CNBC Pro analysis of FactSet data. Over the past year, high inflation has weakened the purchasing power of investors who rely on dividend payments as a source of income. When companies increase their payout rates faster than prices rise, it enables shareholders’ investment returns to keep up and enhance purchasing power throughout the investment period. Air Products & Chemicals Air Products has benefited from the rise in industrial products in Europe — it reported a 6% rise in volumes and an 8% increase in prices across the group annually for the second quarter of this year. For comparison, German industrial giant BASF , a proxy for the entire industry, suffered a 13% volume collapse for the second quarter of 2023. However, investors have been “skittish” about the stock after the company decided to change how it calculates capital expenditures, according to investment bank Berenberg. The company plans to exclude build costs incurred for Neom, the multibillion-dollar green hydrogen electrolyzer project in Saudi Arabia. “The picture for Air Products nevertheless remains one of a well-run core business in a defensive market,” said Sebastian Bray, equity analyst at Berenberg Research, in a note to clients on May 16. APD 1Y line According to FactSet, shares of Air Products, which employs about 21,000 people, currently trade with a dividend yield of 2.6%, a fifth more than the industry average of 2.1%. The stock currently trades at 22.5 times the forward price-to-earnings ratio, which is a discount to its European peers Linde , which is at 24.8x, and Air Liquide , which trades at 23.4x. “Given Air Products’ arguably higher potential exposure to commodity ammonia pricing in future, we believe this lower valuation is justified,” Bray added. It should be noted, however, that past performance cannot be used to forecast future dividend payouts. In addition, Air Products and Automatic Data Processing have been raising their shareholder payouts each year — beating inflation — yet their dividend yields remain smaller compared with companies known for their dividend yield. Automatic Data Processing New Jersey-headquartered Automatic Data Processing has paid out a more significant dividend per share than Air Products in 24 of the past 40 years. The company also raised its dividend by 13.3% per year on average over the past four decades, lower than the 11% hike per year on average offered by Air Products. Shares of dividend-paying companies are also valued for their potential for stability during uncertain market conditions, which can lead to increased demand for their stocks and higher stock prices. Automatic Data Processing’s stock has fallen by 11% this year, but investment bank Stifel believes the stock “looks oversold” at current levels. ADP 1Y mountain “ADP is trading at a 28% premium to the S & P500 [earnings per share] multiple, well below its historical average of ~50%, on earnings that seem properly risk-adjusted,” said Stifel analysts led by David Grossman in a note to clients on April 26. The stock currently offers a dividend yield of 2.4%, more than two and a half times its industry average.