Dividend Investing: 3 Boring Dividend Stocks Yielding Up to 10.61%

Boring Businesses Can Provide Exciting Returns

In today’s stock market, people like to chase the hottest tickers. But for income investors, some of the seemingly boring companies can be of great help.

There are several reasons for it. Because these companies are not the hottest commodities, their prices haven’t been bid up that much, meaning earning a decent yield is still possible.

Moreover, boring businesses tend to come from slow-changing industries. If a company has an established position in one of these industries, it doesn’t need to reinvest that much compared to a company that’s making “the next big thing.” Therefore, it can actually return some profits to shareholders.

Below I have compiled a list of three unique boring businesses. They come from three drastically different industries. But there’s one thing in common: they all stand out when it comes to returning value to shareholders.

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Illinois Tool Works Inc.

Illinois Tool Works Inc. (NYSE:ITW) may sound like a boring name, but the company has delivered extraordinary returns to investors over the years.

Headquartered in Glenview, Illinois, ITW is a global leader in multi-industrial manufacturing. The company has been in business for over a century. It currently operates through seven segments: Automotive OEM, Test & Measurement Electronics, Food Equipment, Polymers & Fluids, Welding, Construction Products, and Specialty Products. (Source: “Third-Quarter 2017 Earnings Conference Call,” Illinois Tool Works Inc, last accessed November 15, 2017.)

The company pays quarterly dividends of $0.78 per share, translating to an annual yield of two percent. While there are plenty of higher-yielding stocks trading in the market, Illinois Tool Works deserves income investors’ attention for a very simple reason: dividend growth.

The company has raised its payout every year for the past 52 years. That makes ITW stock a “dividend king,” which is a title reserved for companies with at least 50 years of annual dividend increases. Among the thousands of companies trading on U.S. stock exchanges, only 23 of them have that title.

Best of all, after more than 100 years of operations, Illinois Tool Works is still growing its business. In the third quarter of 2017, total revenue grew four percent year-over-year to $3.6 billion. Earnings came in at $1.71 per share, up 14% from the year-ago period. (Source: “ITW Reports Third Quarter 2017 Results,” Illinois Tool Works Inc, October 23, 2017.)

STORE Capital Corp

There’s a reason why many investors choose to own income properties. While there are some hassles associated with being a landlord, such as chasing late payments and fixing leaky faucets, the predictable rental income stream provides peace of mind.

But there might be a better and more flexible way to collect rental income: through investing in real estate investment trusts (REITs). These are companies that own real estate assets, and many of them trade on stock exchanges.

REITs were first created as tax pass-through entities, meaning they are not taxed at the corporate level, but have to distribute almost all their profits to investors in the form of dividends.

STORE Capital Corp (NYSE:STOR) is a REIT that specializes in single tenant operational real estate. As of September 30, 2017, the company’s portfolio consists of investments in 1,826 properties located across 48 states.

Renting out properties is not an exciting business, but it does allow STORE Capital to earn a steady stream of rental income. Its properties are leased to 382 commercial tenants coming from 102 different industries. The weighted average remaining lease contract term was approximately 14 years at the end of the third quarter of 2017. With an occupancy rate of 99.5%, STORE Capital is basically running a cash cow business. (Source: “Foundation Distinction,” STORE Capital Corp, last accessed November 15, 2017.)

Thanks to a stable and profitable business, STORE Capital dishes out generous dividends. The company recently raised its quarterly dividend rate to $0.31 per share, giving STOR stock an annual yield of 4.81%.

And the best could be yet to come. In the first nine months of 2017, STORE Capital generated adjusted funds from operations of $1.28 per share, representing a six percent increase year-over-year. Considering that it paid total dividends of $0.89 per share during this period, the company had a payout ratio of less than 70%, leaving plenty of room for future dividend increases. (Source: “STORE Capital Announces Third Quarter 2017 Operating Results,” STORE Capital Corp, November 2, 2017.)

Buckeye Partners, L.P.

Last but certainly not least, we have Buckeye Partners, L.P. (NYSE:BPL), a master limited partnership (MLP) that owns and operates a diversified network of energy pipelines.

Again, pipelines are far from being an exciting business, but they do provide all the ingredients needed to make a top dividend stock.

You see, oil and gas pipelines can be extremely costly to build. But once up and running, they don’t cost that much to maintain. And because the business is fee-based, pipeline operators can keep making money, even during commodity price downturns.

Moreover, once an existing pipeline is operating, it’s almost impossible to get the regulatory approval to build another pipeline running side-by-side. In other words, pipeline companies can enjoy monopoly status in their operating regions.

Buckeye Partners happens to be one of the largest independent liquid petroleum products pipeline operates in the U.S. in terms of volume delivered. Its current portfolio consists of approximately 6,000 miles of pipeline and over 120 liquid petroleum products terminals with total storage capacity of more than 115 million barrels.

Energy companies pay Buckeye Partners a fee for transporting and storing energy products. In the first half of 2017, 98% of the partnership’s adjusted earnings before interest, tax, depreciation and amortization was fee-based. (Source: “J.P. Morgan Midwest Energy Infrastructure/MLP 1×1 Forum,” Buckeye Partners LP, last accessed November 15, 2017.)

Other than a stable business model, Buckeye Partners also stands out due to its attractive dividend yield. With a quarterly distribution rate of $1.2625 per unit, the partnership offers an annual yield of 10.61%. Since Buckeye went public in December 1986, it has paid a cash distribution every single quarter. (Source: “Distribution History,” Buckeye Partners LP, last accessed November 15, 2017.)