Storage stable aqueous dispersions of a heat-reactive hydrophilic phenolic resin (e.g., phenol/formaldehyde) are disclosed. The dispersions comprise a base resin that is the reaction product of an aromatic alcohol and an aldehyde, and an etherified resin component selected from the group consisting of an etherified phenol/aldehyde resin, an etherified cresol/aldehyde resin, and mixtures thereof. The dispersions further comprise a protective colloid (e.g., polyvinyl alcohol). The addition of the etherified resin component in an amount of at least about 20% by weight of the base resin provides storage stability, but does not adversely affect the desirable physical and chemical characteristics (e.g., chemical resistance) of end products made from such dispersions. Moreover, the dispersions of the present invention can avoid the use of etherified resin components derived from bisphenol-A and/or xylenols, which present heath concerns in food coating applications.