Three 20-Year Dividend Holdings: Assessing Moats, Cash Flows, and Valuation

The core of a 20-year investment is not a prediction about next quarter's earnings, but a conviction about a business's ability to compound capital for decades. This requires two non-negotiables: a wide and durable competitive advantage, and a consistent engine for generating cash. Without them, even the most generous dividend yield is a mirage.

A wide moat is the foundation. It's the economic equivalent of a fortress wall, protecting a company's profits from competitors. This advantage allows a business to earn returns on capital that exceed its cost of capital over long cycles. It's the reason Coca-Cola can command pricing power across 200 countries, or why a utility like Eversource can collect steady cash flows from a regulated, essential service. These are the businesses that don't just survive market downturns-they often emerge stronger. The track record of Dividend Aristocrats, companies that have raised their payouts for at least 25 consecutive years, is powerful evidence of this resilience. They have navigated the dot-com bust, the 2008 crisis, and the pandemic, all while maintaining their commitment to shareholders. Their consistency is not luck; it is the result of operating models built to endure.

This durability translates directly to cash flow. A business with a wide moat can generate excess cash over time, which is the fuel for compounding. This is where a proven dividend policy becomes a critical signal. A company that has consistently increased its dividend for decades is demonstrating disciplined capital allocation. It is choosing to return capital to shareholders rather than squander it on poor acquisitions or unprofitable ventures. This discipline is a hallmark of management that prioritizes long-term value creation over short-term optics. The historical data supports this approach: studies show dividend-growing stocks have tended to outperform non-dividend growers over extended periods while exhibiting lower volatility.

The alternative is a dividend trap-a high yield that masks deteriorating fundamentals. These are companies where the payout is unsustainable, often funded by debt or eroding profits. Chasing yield without examining the underlying business model is a path to capital loss, not compounding. The goal over a 20-year horizon is not to chase the highest immediate return, but to own a piece of a business that can grow its intrinsic value year after year. That requires focusing on quality, not just yield.

The bottom line is that compounding capital through decades demands patience and a focus on the fundamentals. It means seeking out businesses with wide moats that generate reliable cash flows, and rewarding management teams that return that capital wisely to shareholders. It is a strategy built for the long haul, where the power of reinvested dividends and business growth can work in concert to build wealth.

Case Study 1: Coca-Cola – The Wide-Moat Beverage Franchise

Coca-Cola's 63-year dividend growth streak is a powerful testament to management discipline and a business model built to endure. This consistency is not an accident; it is the direct result of a wide and durable economic moat. The company's global brand portfolio and vast distribution network create a fortress wall around its profits, granting it significant pricing power and market share stability. This moat allows Coca-Cola to navigate inflation and currency swings, a critical advantage in a volatile world.

The operational discipline behind this moat was evident in its 2025 performance. The company delivered 6% organic revenue growth and achieved a remarkable operating margin of 32.0%, a substantial expansion from the prior year. This margin improvement, driven by organic growth and cost management, demonstrates the efficiency of its franchise model. The company collects steady cash flows from its bottlers, who shoulder most capital costs, allowing Coca-Cola to focus on its high-margin beverage concentrate business. This model has consistently generated the excess cash needed to fund its dividend.

Cash flow generation remains the bedrock of its payout. Year-to-date, the company produced $8.5 billion in free cash flow excluding the fairlife contingent consideration payment. This robust cash engine has historically supported the annual dividend increases, reinforcing the signal of financial strength. Yet, for a 20-year holder, the valuation relative to this long-term earnings power is the critical question. A stock's price today must be considered against its ability to compound for decades. While the business model is exemplary, the investor must ensure the current price does not demand perfection from a company that has already delivered so much.

The bottom line is that Coca-Cola presents a classic value investing case. It possesses a wide moat, disciplined operations, and a proven track record of returning capital. The challenge is to buy it at a price that leaves room for error and allows for meaningful compounding over the next two decades.

Case Study 2: Procter & Gamble – The Resilient Consumer Staples Engine

Procter & Gamble's 2025 results are a masterclass in operational resilience. While the company faced volatile macro-economic, geopolitical and consumer headwinds, it delivered a steady 4% core earnings-per-share growth. This is not a story of a business merely surviving a tough year; it is a demonstration of a durable engine that can deliver earnings stability even when costs are pressured. For a 20-year investor, this kind of consistency is more valuable than a single year of spectacular growth.

The strength of the business model is evident in its cash generation. P&G produced adjusted free cash flow productivity of 87%, a powerful metric that shows how efficiently the company converts its earnings into cash. This robust cash flow is the lifeblood of its capital allocation strategy, funding both its consistent dividend and strategic investments. The growth was also broad-based, with nine of ten product categories posting organic sales gains, and the company achieving its 39th consecutive quarter of top-line growth. This streak underscores the durability of its portfolio, where the performance of winners like Family Care and Personal Health Care can offset softer spots.

This operational discipline has translated into a remarkable track record of financial execution. Fiscal 2025 marked the company's ninth consecutive year of core earnings-per-share growth. Such a run is exceptionally rare and speaks to a management team that can navigate inflation, tariffs, and shifting consumer habits without sacrificing long-term value. The ability to grow earnings while returning significant cash to shareholders is the hallmark of a business with a wide moat and a patient capital allocation philosophy.

The bottom line is that P&G's setup is built for the long term. Its resilient model, demonstrated by consistent earnings and cash flow, provides a reliable foundation for funding a dividend that has grown for decades. For the value investor, this is the kind of business where the price paid today matters less than the certainty of its ability to compound for another generation.

Case Study 3: Enterprise Products Partners – The Essential Midstream Asset

For a value investor, the ideal long-term holding is a business that generates reliable cash flow with minimal cyclicality. Enterprise Products Partners exemplifies this profile. Its capital-intensive model, focused on the essential transportation of energy, provides a stable foundation for income. The partnership's cash flow metrics reveal a disciplined engine designed for decades of compounding.

The core of its investment case is its robust cash generation and distribution coverage. In the third quarter, Enterprise produced $1.8 billion in Distributable Cash Flow (DCF). This covered the quarterly distribution by a tangible 1.5 times. That buffer is critical. It provides a margin of safety against operational hiccups or minor downturns in volumes, ensuring the partnership can maintain its payout even in a less-than-perfect quarter. More broadly, the company's payout ratio, based on Adjusted Cash Flow from Operations, was just 58% for the trailing twelve months, leaving ample room for growth and reinvestment.

This stability stems directly from the business model. Enterprise operates a vast network of pipelines and terminals, moving natural gas, NGLs, and crude oil. A significant portion of its revenue is derived from fee-based contracts, which provide predictable cash flows regardless of commodity prices. This fee-based structure, combined with contracted volumes, insulates the partnership from the price volatility that plagues upstream producers. The operational data supports this: volumes for key services like natural gas pipeline transportation and NGL pipelines grew year-over-year, demonstrating underlying demand for its essential services.

The partnership's capital allocation reflects this disciplined cash flow. While funding its distribution, Enterprise also retained a substantial portion of DCF-$635 million in the third quarter-to reinvest in growth projects. This reinvestment is not a drain on cash; it is a strategic deployment to expand the network and secure future fee streams. The company expects to spend approximately $4.5 billion on organic growth capital in 2025, a commitment that signals confidence in its long-term cash flow trajectory. Furthermore, the board recently expanded its common unit buyback authorization to $5 billion, providing another disciplined method to return capital to investors when the stock trades below its intrinsic value.

The bottom line is that Enterprise Products Partners offers a classic, low-volatility income stream. Its wide moat is built on physical infrastructure and essential services, its cash flows are supported by contracted volumes, and its distribution is backed by a healthy coverage ratio. For a 20-year holder, this is the kind of business where the price paid matters, but the consistency of the cash flow engine matters more. It is a foundational asset for a portfolio seeking reliable compounding through the decades.

Valuation, Catalysts, and Long-Term Watchpoints

The analysis of Coca-Cola, Procter & Gamble, and Enterprise Products Partners has laid out the foundation of durable businesses. The next step is to synthesize this into a forward-looking view. For the value investor, the critical question is not just whether a company has a wide moat and a strong track record, but whether the current price offers a sufficient margin of safety relative to its long-term intrinsic value. A high dividend yield alone is not a margin of safety; it is a red flag if it signals a deteriorating business. The stock must be priced attractively against the decades of compounding it is capable of.

The key catalysts for these holdings are deeply rooted in their operational discipline. For Coca-Cola and P&G, the primary driver is the consistent execution of capital allocation. Their ability to grow earnings, expand margins, and generate robust free cash flow-evidenced by Coca-Cola's 6% organic revenue growth and P&G's 4% core EPS growth-is the fuel for future dividend increases. Management's commitment to returning capital via dividends and buybacks, as seen in Enterprise's expanded $5 billion buyback authorization, is a positive signal of confidence. Over the next two decades, the watchpoint is whether this discipline persists through new economic cycles and evolving consumer preferences.

The second major catalyst is the preservation of the competitive moat. This is the central challenge for any long-term holder. For Coca-Cola and P&G, it means defending brand loyalty and distribution strength against new entrants and shifting health trends. For Enterprise, it means maintaining its essential, fee-based infrastructure in a decarbonizing energy landscape. The track record of Dividend Aristocrats provides a powerful benchmark for resilience. These companies have weathered the dot-com bubble, the 2008 crisis, and the pandemic, all while raising dividends. Their historical performance, with dividend-growing stocks tending to outperform the broader market over extended periods, is evidence of a durable model. Yet, the future is not guaranteed. The investor must monitor for any erosion in pricing power, market share, or cash flow predictability.

On the risk side, the primary vulnerability is valuation. Buying at a rich multiple leaves no room for error. The macroeconomic environment will also be a factor, particularly for consumer staples and energy. While these businesses are less cyclical, prolonged high interest rates or a deep recession could pressure consumer spending or industrial demand. For Enterprise, the long-term shift in energy demand is a structural risk that must be managed through strategic reinvestment.

The bottom line is that a 20-year investment thesis requires a patient, disciplined approach. It means focusing on the quality of the business and its cash-generating engine, not just the current yield. The investor must ensure the price paid today leaves a margin of safety, allowing for the power of compounding to work over the decades. By monitoring capital allocation discipline, moat preservation, and macroeconomic trends, the value investor can navigate the long road ahead with confidence.