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11 Boring But Beautiful Dividend Stocks to Buy Now

Charles Lewis Sizemore, CFA

By Charles Lewis Sizemore, CFA Kiplinger Consumer News Service

Published August 2, 2019

11 Boring But Beautiful Dividend Stocks to Buy Now
Stocks aren't all that different than cars, in some ways. Sure, the Ferrari is a lot of fun to drive, and you look cool sitting behind the wheel. But it's also going to cost you a fortune, and high-performance cars spend a lot of time at the mechanic's shop.

Now, compare that to a Honda Civic. You never really notice a Honda Civic on the road. It's utterly forgettable. But it's also just about indestructible, requires virtually no attention from you, and it quietly and efficiently does its job.

Consider that mentality when you're tracking down stocks to buy. A highflying growth pick can be a lot of fun to own. You look smart owning it, and it's fun to talk about at parties. But when the market's mood swings the other way, you're often left with some nasty losses and a bruised ego. Meanwhile, that dividend-paying value stock in your portfolio might not be particularly interesting. But over the long haul, it's a lot less likely to give you problems. Like that Honda Civic, it will quietly do its job with no stress and no drama.

"Some of our most profitable trades over the years have been some of our most boring," explains Chase Robertson, principal of Houston-based RIA Robertson Wealth Management. "We've done well for our clients by mostly avoiding the trendy sectors and focusing instead on value and income."

Here are 11 boring but beautiful dividend stocks to buy now. They might not be much to look at, but they're likely to get the job done over the long term. And when you need them most - in retirement - they'll be less likely to break down on you.

SEE ALSO: 50 Top Stocks That Billionaires Love

Crown Castle International

Market value: $54.1 billion

Dividend yield: 3.5%

You could invent the next viral iPhone app and make millions. But let's face it: That's not likely. You also could make millions investing in the stock of a company that makes the next viral iPhone app. But again, not likely. By the time you know about the app, chances are good the stock has already made its run.

Rather than play the guessing game of who will make the next killer phone or the next killer app, why not invest in the trend that makes phones and apps so lucrative?

We all know that mobile data usage is only likely to increase in the years ahead. Buying cell towers gives you a piece of that action, and Crown Castle International (CCI, $130.16) is one of the largest independent owners of cell towers and other telecom infrastructure. This real estate investment trust (REIT) owns, operates and leases more than 40,000 towers and around 70,000 miles of fiber optic cable.

Is it exciting? Absolutely not. But it's one of those businesses that provides critical infrastructure for the modern economy, and it does so largely behind the scenes.

Crown Castle, as a REIT, is required to pay out at least 90% of its taxable profits out as dividends to shareholders. So like many REITs, it outyields the market (1.9%) with a respectable 3.5%. Moreover, CCI has improved its dividend every year since 2014; over the past five years, that payout has grown a cumulative 221%.

AT&T

Market value: $250.9 billion

Dividend yield: 5.9%

Staying on the telecom theme, AT&T (T, $34.34) has been a boring play for many years now. Even its seemingly transformative recent buyout of Time Warner (which owns HBO, Cinemax, TBS and TNT) was a drawn-out affair that got bogged down in court battles.

It seems almost silly now, but in the late 1990s and early 2000s, AT&T was a bubble stock. Investors couldn't get enough of everything related to telecommunications, and AT&T delivered the goods. But when the bubble burst, AT&T crashed hard. Today, nearly 20 years after the peak of the internet mania, T shares still are more than 40% below their old highs.

Of course, 20 years later, AT&T is a very different company. Its mobile and home internet businesses are mature, and its paid TV business is actually shrinking, albeit slowly. AT&T is essentially a utility stock. But T belongs on any short list of boring stocks to buy now given its current pricing.

AT&T took a tumble in 2018 that brought it to its most attractive prices in recent memory. The stock has recovered somewhat, but not completely, and still offers a value at less than 10 times analysts' expectations for future profits, and a fat dividend yield of 5.9%.

Are you going to get monster growth from AT&T? Of course not. But modest capital appreciation and high levels of income should deliver a very respectable total return.

Altria Group

Market value: $94.1 billion

Dividend yield: 6.4%

"Beautiful" and "tobacco" are two words you rarely see in the same sentence. Big Tobacco is an ugly business, and there's really no reason to pretend otherwise.

Tobacco stocks, however, are the prototypical boring stock that you can still slot into your portfolio. They're not trendy or glitzy. They're about as far from cutting edge as you can get. And they're essentially forbidden by law to advertise. They just quietly gush cash flow and pay it out to their shareholders as dividends.

This brings me to Altria Group (MO, $50.31). Altria markets the Marlboro and other cigarette brands in the United States. It also sells Copenhagen and other brands of chewing tobacco, as well as vaping products under the Juul brand, among other businesses.

Altria became grossly overvalued a few years ago as the global hunt for yield pushed investors toward dividend stocks. But the stock has been sliding for the past two years and is now very attractively priced for the first time in ages. Its forward P/E of roughly 11 is downright reasonable. And a dividend yield well north of 6.4% is difficult to turn down.

While its core businesses are boring, Altria has some things in the works that could pay off in spades. Altria is dabbling in the marijuana space via its investment in Cronos Group (CRON). If the race toward legalization picks up speed, Altria certainly would have the infrastructure in place for large-scale production.

So, Altria fits right in with other boring dividend stocks to buy ... but it does have a potentially interesting future.


CVS Health

Market value: $73.1 billion

Dividend yield: 3.6%

The neighborhood pharmacy is hardly a scintillating stock story. It's essentially a convenience store and a place for a mostly older clientele to pick up their medication. And in a world in which Amazon.com (AMZN) is quickly replacing neighborhood stores, the local pharmacy might seem simultaneously boring and risky.

All of that might be true. But CVS Health (CVS, $56.26) is more than just a pharmacy. It's quietly evolving into a one-stop-shop for basic healthcare. The chain has been operating walk-in MinuteClinics for years, offering basic treatment, physicals and even vaccinations. And more recently, its HealthHUB concept is expanding CVS's reach into healthcare, providing patients with full primary-care services, dietitians and even weight-loss programs. Under this new format, more than 20% of the store's square footage is dedicated to health services as opposed to retail sales. And the company even went so far as to acquire health insurer Aetna back in 2018 - although, while the deal already closed, a U.S. district judge has yet to sign off on it.

Rather than compete with the likes of Amazon, CVS is choosing to play an entirely different game.

CVS is dirt-cheap, trading at less than eight times expected earnings and below 0.4 times sales. And its dividend yield, while at 3.5% isn't exceedingly generous, is as high as it has been since the 1990s.

Wall Street isn't particularly fond of CVS right now, as tech and social media are en vogue and retail is very much out of fashion. But CVS is quietly trying to make itself "Amazon-proof," and patient investors are getting paid to wait for Wall Street to appreciate that.

Macquarie Infrastructure

Market value: $3.6 billion

Dividend yield: 9.6%

Macquarie Infrastructure (MIC, $41.69) is the quintessential "NIMBY" stock.

NIMBY, of course, stands for "not in my backyard." And when you see what Macquarie has in its investment portfolio, you'll no doubt agree.

Macquarie's International-Matex Tank Terminals (IMTT) division handles and stores bulk liquids such as petroleum, chemicals and vegetable oil. IMTT leases more than 48 million barrels' worth of storage capacity. This clearly is something you don't want next to your house. But it's the sort of boring-yet-critical service that underpins the economy.

Macquarie also has an Atlantic Aviation division that provides aircraft fueling services, plane de-icing, hangar rental and other aviation services. (No one wants to live next to an airport.) And finally, the company's third major division is MIC Hawaii, which runs a regulated gas utility and a liquefied petroleum gas terminal in Hawaii.

MIC's stock took a 40% beating in a single day in 2018 after the company reduced its dividend, and the stock price has been depressed ever since. Management did a poor job of telegraphing the dividend cut, undermining investor confidence.

But in the words of Warren Buffett, the secret to success in this business is to be "greedy when others are fearful." Investors are afraid of Macquarie after its dividend cut, and it shows in the stock's pricing. MIC trades for just 1.2 times book value and yields close to 10%.

Enterprise Products Partners LP

Market value: $65.0 billion

Distribution yield: 5.9%*

On the theme of basic infrastructure, few companies are less exciting than a midstream pipeline operator. They don't really do anything. Once a pipeline is built, there's not much to be done other than basic maintenance. The pipeline moves oil and gas products from point A to point B. The operator collects a fee.

Simple.

But sometimes the best businesses are the simplest. And among pipeline operators, few can compete with Enterprise Products Partners LP (EPD, $29.70).

Enterprise Products is one of the very best operators in the midstream space, and with more than 49,000 miles of pipelines, it's also one of the biggest. Enterprise Products also owns 260 million barrels of liquids storage capacity and 14 billion cubic feet of natural gas storage capacity.

Unlike many of its peers, Enterprise has always been conservatively managed, preferring to grow slowly and steadily. This enabled the company to survive the turmoil in the energy markets over the past five years with its distributions intact. Its more aggressive and more heavily indebted peers weren't so lucky.

At current prices, Enterprise Products yields just shy of 6%, and the company has raised its distribution at a little more than 5% per year over the past decade. This isn't a glamorous stock. But it's consistent.

* Distribution yields are calculated by annualizing the most recent distribution and dividing by the share price. Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.

3M

Market value: $101.7 billion

Dividend yield: 3.3%

It's hard to find too many companies more boring than 3M (MMM, $176.76). It makes Scotch tape and Post-it Notes, for crying out loud.

Of course, 3M does quite a bit more than tape and sticky notes. They make everything from the reflective films that cover traffic signs to insulation for airplanes. But all of their products have a couple things in common. To start, they perform their functions mostly behind the scenes. Secondly, they are products that tend to get used up and get replaced. And finally, demand tends to be pretty inelastic. When you need them, you need them.

These are exactly the kinds of qualities you want to see when seeking out boring dividend stocks to buy.

MMM's stock movement has been a little too exciting of late, however. Revenues and earnings growth have been sluggish in recent years, causing shares to lose almost a third of their value from their old 2018 highs. The flip side is, MMM now trades at a reasonable 17 times next year's earnings, and its 3%-plus yield is at highs not seen in a decade.

Iron Mountain

Market value: $8.6 billion

Dividend yield: 8.2%

If you've ever worked in a corporate office, you're probably familiar with Iron Mountain (IRM, $29.91). This REIT's locked shredder containers are a fixture in practically every office building in America and in a fair amount of the rest of the world.

Iron Mountain is the global leader in secure document storage and destruction. The company serves more than 230,000 organizations globally and operates more than 1,400 facilities across approximately 50 countries.

Iron Mountain's business seemed unassailable until electronic document storage went mainstream. But that doesn't mean the company is at risk of obsolescence any time soon. Its legacy storage business continues to throw off a lot of cash flow, and Iron Mountain has been busily diversifying into data centers and into faster-growing emerging markets.

Meanwhile, Iron Mountain is among the highest-yielding of these boring stocks to buy, throwing off more than 8% annually. The REIT has raised its dividend every year since 2010 and expects more payout growth to come.

There is nothing interesting or exciting about document storage or shredding. But it's a stable business, and Iron Mountain is the undisputed market leader.

Realty Income

Market value: $22.2 billion

Dividend yield: 3.9%

REITs are generally a sleepy corner of the market. But among these real estate owners, Realty Income (O, $70.18) is a particularly unexciting player.

Realty Income owns a vast portfolio of more than 5,800 retail properties spread across 49 states and Puerto Rico. But it doesn't own flashy trophy properties. You won't see many Fifth Avenue retail shops in Realty Income's portfolio. You're a lot more likely to find the local auto supply store or pharmacy. In fact, CVS Health Corporation, which was mentioned earlier, is one of its larger tenants. Other large tenants include Walgreens (WBA), 7-Eleven, Dollar General (DG) and LA Fitness.

While nothing in this world appears to be 100% Amazon-proof, Realty Income's tenants come awfully close.

Over its life, Realty Income has been a dividend-compounding machine. It has delivered 588 consecutive monthly dividends and grown the payout at a 4.6% annualized rate since its 1994 IPO. Realty Income's history of income growth is difficult to top - it has raised its dividend for 87 consecutive quarters and counting.

You probably won't get rich buying Realty Income stock. But you'll collect around 4% in current yield, paid monthly, and that dividend should grow at around 4% to 5% per year. That's not a windfall, but it's better than what you can get in the bond market unless you're willing to take a lot more risk.

VEREIT

Market value: $9.0 billion

Dividend yield: 6.0%

Along the same lines, VEREIT (VER, $9.24) is another boring but beautiful REIT.

Like Realty Income, VEREIT is a retail landlord. And also like Realty Income, its leases are mostly "triple net," which means tenants are responsible for all taxes, insurance and maintenance costs. VEREIT's job is simply to keep cashing the rent checks.

VEREIT has a portfolio of around 4,000 properties containing a total of 94.7 million square feet, and it shares many tenants - including CVS, Walgreens, Dollar General and LA Fitness - with Realty Income.

VEREIT is a little riskier than Realty Income, however. Its largest tenant, at 5.4% of the total portfolio, is Red Lobster. The REIT's once-higher concentration in the struggling restaurant chain weighed on it considerably, but it has been reducing its exposure. Moreover, VEREIT's top 10 tenants collectively account for only 27% of its total portfolio, and it's otherwise very well-diversified geographically.

However, because of its slightly higher risk profile, VEREIT - at a 6% yield - is priced to deliver stronger returns. Sure, we're unlikely to see large dividend increases in the immediate future until the company works through some lingering legal issues stemming from an accounting snafu by the previous management team. But that's OK. A 6% yield is attractive in a world in which the 10-year Treasury barely yields 2%.

Albemarle

Market value: $7.7 billion

Dividend yield: 2.0%

Elon Musk's Tesla Motors (TSLA) makes beautiful cars that are technological wonders. Unfortunately, the company has never met a deadline it couldn't break, and it hemorrhages cash. Tesla has yet to deliver a full year of profitability.

Musk's vision of a world of self-driving, zero-emission electric vehicles is a noble one, and we should sincerely hope that it comes to pass. But it's questionable whether Tesla still will be around to reap the rewards.

Most would-be gold miners that moved to California for the gold rush of the 1840s failed to strike it rich. It was the entrepreneurs selling pickaxes and other goods and services to the miners that really prospered. Along the same lines, if you're looking to bet on the long-term success of electric vehicles, don't buy a loss-making automaker. Instead, buy the one element that every electric vehicle needs for its battery: lithium.

Albemarle (ALB, $73.09) is one of the world's largest lithium producers, and company projections show global lithium demand growing at a compound annual growth rate of 21% between 2018 and 2025.

Lithium was a major growth story a few years ago due in no small part to the buzz surrounding Tesla. But a short-term supply glut caused the price of lithium producers to collapse. Albemarle today trades for barely half its old 2017 highs.

This short-term weakness looks like a buying opportunity. Demand for lithium should only increase as every major automaker steps up to compete with Tesla, and today you can buy the stock at 2016 prices.

Charles Lewis Sizemore, CFA, is a Contributing Writer for Kiplinger.

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