Dividend investors usually focus on companies that have a long track record of increasing their dividends year after year. The companies with at least 25 years of consecutive dividend increases are especially favored by income-oriented investors. This is actually not a bad idea as long as these companies continue to increase dividends. However, when one of these stocks was forced to cut its dividend, its share price usually plunges along with its dividend. In these situations, the losses due to share price decline might wipe out the dividend income that has been collected over the years.

Another problem with these stocks is that their dividend yields might be too small. Currently, there are around 138 stocks that have been increasing their dividends for the last 25 years. However, only 31 of these stocks have a current yield of at least 3%. One of these 31 stocks that is favored by income investors is The Coca-Cola Company (NYSE:KO) which currently pays $1.60 per share annually, corresponding to a dividend yield of almost 3%. That may look great on paper, but the problem is The Coca-Cola Company’s earnings per share over the previous 12 month period was only $1.81. This means KO sports a PE ratio of nearly 30. Analysts expect The Coca-Cola Company to earn 2.26 in 2020. Assuming that these estimates aren’t too optimistic, this means KO is trading at a forward P/E of 24. Coca-Cola is one of the 25 biggest stocks in the market but KO isn’t among the 30 most popular stocks among hedge funds. It isn’t even among the top 100.

Also, The Coca-Cola Company’s net income hasn’t shown any signs of growth over the last 3 years. The stock price gained only because Central Banks worldwide have been artificially keeping interest rates down, leaving income investors with no options but overpriced dividend stocks. Do you feel like KO is really a conservative investment idea right now?

Another example is Kimberly-Clark Corporation (NYSE:KMB). It has a current yield of 3.0% and pays $4.12 annually. Unfortunately, Universal Corporation earned only $5.83 in the last twelve months, and its total revenue has been stagnant for the last 3 years. Kimberly-Clark Corporation’s current P/E is nearly 24. Like KO, Kimberly-Clark’s stock price is inflated due to low interest rates. KMB was trading at $136 in the summer of 2016 too.

Let’s take a look at another dividend superstar, 3M Company (NYSE:MMM) which has been increasing its dividends for 61 years. It has a forward dividend yield of 3.4% and a trailing P/E of 20. If you had invested in this stock 61 years ago, that would have been great. However, if you had bought 3M Company shares two years ago, you are looking at capital losses of 35%.

Take Consolidated Edison, Inc. (NYSE:ED), a utility stock. It sports a dividend yield of 3.4% and a forward P/E of nearly 20. Consolidated Edison, Inc. hasn’t shown any top line growth since 2015, but its stock price increased 40% during this period simply because income investors are forced to buy already expensive dividend stocks.

Energy companies are no different. Chevron Corporation (NYSE:CVX) has been increasing its dividend for 32 years and currently has a 4% yield. Unfortunately, that’s nearly 70% of its earnings. Chevron Corporation trades for 17 times its 2020 expected earnings assuming that oil prices don’t go down in the middle of this oil glut that is turning USA an oil exporter. We might as well join OPEC to support energy prices so that our energy giants like Chevron can keep up with its dividend payments.

We don’t think these are conservative investments suited for conservative income investors. Recently we uncovered a better, more conservative dividend stock than Chevron Corporation, Consolidated Edison Inc., 3M Company, Kimberly-Clark Corporation, and The Coca-Cola Company. This stock’s current market cap is only $155 million but it has no debt and $130 million in cash.

The stock is Adams Resources & Energy (NYSE:AE). It is expected to generate $21 million in operating cash flow this year. It owns a fleet of 500 trucks and valuable real estate. We are basically paying $25 million net of cash to buy this profitable company. We profiled this stock in our monthly newsletter 2 weeks ago when it was trading for $31 and change. At the time it was trading for only $5 million premium to its net cash position.

I believe the market is completely ignoring Adams Resources & Energy’s huge cash pile which is enough to cover its dividend payments for the next 30 years.  That’s why I believe the stock’s price can increase to $60. Adams Energy is the cheapest dividend stock I have seen in the last 10 years.

I like AE because it is extremely cheap and I don’t mind getting paid nearly 3% a year while I wait for the stock price to appreciate.