2 Magnificent Dividend Kings Down 19% and 32% to Buy in 2025

Alright, fellow investors, let's dive into an opportunity that's been hiding in plain sight. We're talking about two Dividend Kings that have taken a bit of a tumble in the market, but have the potential to bounce back and reward those who buy in now. Tennant Co. (TNC) and MSA Safety (MSA) are the stars of today's show, and we're going to explore why these two companies are worth considering for your portfolio.



First things first, let's address the elephant in the room. Why have these two Dividend Kings seen their share prices decline by 19% and 32%, respectively? Well, the market can be a fickle beast, and there are several factors at play here. Market conditions, regulatory hurdles, rising interest rates, and sector-specific issues can all contribute to share price fluctuations. Additionally, changes in investor sentiment and company-specific issues can also impact a stock's performance. In the case of TNC and MSA, it's essential to look beyond the surface and consider the underlying fundamentals of these companies.

Now, let's talk about the low payout ratios of TNC and MSA. These two Dividend Kings have payout ratios of 20% and 28%, respectively, which means they have more room to increase their dividends without straining their financial health. This is great news for income-oriented investors, as it indicates that these companies have the potential for significant dividend growth. With such low payout ratios, TNC and MSA could theoretically triple their dividends and still have leftover funding. This passive income potential is too promising to pass up, especially at today's prices.



Tennant Co. (TNC) is a leading provider of mechanized cleaning equipment, with a 14% market share in the industry. The company's investment thesis today hinges upon the success of its most recent wave of innovation: autonomous mobile robots (AMRs). These AMRs multiply customers' labor productivity and could propel the company's stock to new heights. Between 2018 and 2023, TNC sold roughly 6,500 earlier versions of its AMRs. However, in just the first nine months of 2024, the company had sold 2,200 AMRs, powered by the launch of its newest product, the X4 ROVR. This acceleration in growth has resulted in AMR equipment now equaling roughly 5% of TNC's sales. In addition to faster revenue growth, these new X4 ROVR sales offer investors the potential for higher margins thanks to the software subscription included with the AMR. Since launching its first AMR product in 2018, TNC's profitability has steadily improved, with both operating and net profit margins increasing significantly. Management expects to grow sales by 4% over the long term as its AI-powered products become more prominent. With TNC's stock currently trading at just 13 times next year's earnings, the company's leadership position (in market share and innovation), improving margins, and dividend growth potential make it a Dividend King to buy in 2025.

MSA Safety (MSA) holds the No. 1 or No. 2 market share position across a number of safety niches. Powered by this top-dog status, MSA has delivered 40-bagger returns since 2000, increasing its dividend annually as it went. To get a better idea of what exactly MSA does, here are the products it sells in each of its business segments: Fire service (39% of sales): Consists of self-contained breathing apparatuses, protective clothing gear, boots, and helmets Detection (36% of sales): Products to detect and identify fixed gas and flames, portable gases, and refrigerants Industrial personal protective equipment (25% of sales): Includes air-purifying respirators, industrial head protection, and fall protection gear The beauty of these products for investors (aside from their life-saving purposes in the real world) is that each segment's products are entirely non-discretionary. Fighting fires, detecting gas leaks, and keeping industrial workers safe are three things that will not go away anytime soon -- if ever. This essential nature of MSA Safety's equipment explains the company's incredible returns and ascension to Dividend King status. However, the best could still be ahead for the company. Leaning into more connectivity-focused solutions, such as its FireGrid cloud platform and its ALTAIR portable gas detection system, MSA's operating margins are starting to look more "software-like." Pairing safety standards that will only grow more strict with time worldwide with the ongoing evolution of the Internet of Things, it is clear to see that MSA's operations are poised for continued growth.



In conclusion, Tennant Co. (TNC) and MSA Safety (MSA) are two Dividend Kings that have taken a tumble in the market but have the potential to bounce back and reward those who buy in now. With low payout ratios and strong fundamentals, these companies offer income-oriented investors a compelling opportunity to generate passive income and participate in their future growth. So, if you're looking for a way to diversify your portfolio and take advantage of the market's recent pullback, consider adding TNC and MSA to your watchlist and keep an eye on their progress.