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By Serkan Unal

Dividend investors generally seek stability of dividend payouts and solid total return potential from their investment picks. Among small-to-mid cap stocks, there are some that boast strong records of dividend growth over several decades. These stocks generally show consistent earnings power and cash flow generation capacity that secures regular dividend payouts and increases over long periods of time. Here is a closer look at four companies operating mainly natural gas utilities with less than $5 billion in market capitalization and dividend yields above 2% that have more than 30 years of consecutive annual dividend increases. These stocks have provided dividend investors with attractive yields and regular dividend growth.

WGL Holdings Inc. (WGL), a regulated natural gas utility and provider of various energy-related services to customers in the Maryland, Virginia, Delaware, Pennsylvania, and the District of Columbia, has paid dividends for 162 consecutive years and has raised them for 37 years in a row. It yields 3.8% on a payout ratio of 69% of the current-year EPS estimate. Its dividend grew at an average CAGR of 3.2% over the past five years, slower than the company's EPS growth of 5.1% annually over the same period. Recently, the company boosted its quarterly dividend by 5%, saying the increase "reflects confidence in both (its) strategic plan and ability to continue to deliver increased earnings and value to (its) shareholders." Analysts forecast the company's EPS CAGR at 5.3% for the next five years.

WGL is a low-risk defensive play in the natural gas utility sector with a beta of only 0.48. In its own words, WGL offers a "balance of strong, efficient utility operations and non-utility businesses," with "clean energy growth opportunities." Last year, the company delivered record financial results, and is targeting a 7% EPS CAGR through 2016. Over the same period, the company plans to boost its dividend by 5% annually, maintaining a payout ratio of about 65%. In terms of valuation, WGL is trading at 18.1x forward earnings. The stock is a small holding in billionaire Ken Griffin's portfolio.

MGE Energy Inc. (MGEE), a holding company for a regulated utility providing natural gas and electric service in Wisconsin since 1896, has paid dividends annually since 1904 and has raised them for the past 37 consecutive years. The company's 3.3% dividend increase for 2012 was the largest in 20 years. At present, the stock yields 2.8% on a payout ratio of 54% of the current-year EPS estimate. The company's dividend grew at an average CAGR of 2.1% over the past five years, slightly more than half the rate of its EPS growth over the same period. Analysts forecast the company's EPS CAGR at 4% for the next half-decade.

MGEE is a low-risk defensive play with a beta of only 0.38. Based on the 2012 Public Utilities Fortnightly, among U.S. utilities, MGEE had eight best free cash flow, 10th best average ROA, and 17th best profit margin, according to the company. The company achieved EPS growth of 5.7% last year, while generating large savings for both gas and electric residential customers. In response to large fuel-related savings, MGEE proposed a freeze on the electric and natural gas rates through at least the end of 2014. In terms of valuation, this stock is priced at 18.3x. Last quarter, billionaires Cliff Asness and Jim Simons held small positions in this stock.

Piedmont Natural Gas Co. Inc. (PNY), a utility company distributing natural gas to approximately 1 million customers in North Carolina, South Carolina, and Tennessee, has raised dividends for 35 consecutive years. The stock recently hiked its quarterly dividend by 3.3% to 31 cents a share. At present, the stock yields 3.6% on a payout ratio of 72% of the current-year EPS estimate. Over the past five years, the company's dividend grew at an average CAGR of 3.5%, faster than the 1.6% annual rate of the company's EPS growth over the same period. Analysts forecast a faster 5% EPS CAGR for the next five years.

PNY is another low-risk defensive play in the natural gas utility sector. It operates in a constructive regulatory environment, boasting above-average customer growth. In fact, last year was the strongest in new customer additions since 2008. The company also offers opportunities for non-utility midstream growth in the future, as it takes part in the Constitution Pipeline with a 24% ownership stake. The pipeline will transport Marcellus gas to Northeast markets. In terms of valuation, PNY is valued at 18.8x forward earnings, reflecting a premium for its yield. Last quarter, PNY was a holding in the hedge fund of small cap value investor Chuck Royce.

Questar Corporation (STR) is a natural gas-focused energy company operating retail gas distribution, interstate gas transportation and gas production. Its regulated gas utility Questar Gas serves some 900,000 customers in Utah, southwestern Wyoming and a small portion of southeastern Idaho. The company has raised dividends 33 consecutive years. Currently, the stock yields 2.7% on a payout ratio of 57% of the current-year EPS estimate. Over the past five years, the company's dividend grew at an average CAGR of 6.5%, despite the negative EPS CAGR, on average, over the same period. Analysts forecast a 4.6% EPS CAGR for the next five years.

STR is a natural gas play with attractive yield. For its utility operations, the company expects that the "customer growth and feeder-line replacement investment" should drive an EPS CAGR of between 7% and 9% over the long-term, supported by above-average customer growth of between 1.5% and over 2.0% annually. The consolidated company is expected to see long-term EPS CAGR of 4%-to-6%, and is targeting long-term dividend payout ratio of approximately 60%. It also has a repurchase program of up to 1 million shares per year. In terms of valuation, STR is priced at 20.5x forward earnings. Last quarter, the stock was a large holding in the portfolio of Osterweis Capital Management (check out its fourth-quarter holdings).

Source: 4 Small-To-Medium Cap Stocks With More Than 30 Years Of Increasing Dividends