Stay Boring
Dave is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When trying to invest successfully, I often look to other parts of my life where I succeeded to see if I can draw any parallels as lessons. That could be work, athletics, music, raising kids, etc. Recently, I hearkened back to my days on the high school bowling team. (Yes, that's right. Bowling. Laugh it up, fuzzball.)
When I was a young, cocky lad, I used to roll my 16-pound, fingertip-grip Hammer ball down the lane as hard as I could. My coach was always trying to convince me not to throw so hard and keep everything under control. On one particular day, I was struggling mightily. The frustrated coach once again implored me to throw it slower. When I said, "that's no fun", he quickly responded, "Well, if bowling like crap is fun, then you keep throwing like that." I finally had to concede that he was correct (not easy for a 16-year old) and needless to say, when I used his advice and kept everything under control, my game improved.
How does this apply to investing? Simple: what you invest in doesn't always have to be "fun." You can be quite successful investing in things that are boring. We are all human. We are all drawn to the next "big thing" or super growth stock. Pick the right stock and your returns can be massive. Pick the wrong one and you'll be scrambling to make-up the loss.
It's easy to get into "chicks dig the long-ball" mode and start swinging for the fences. But often singles and doubles with a walk or two mixed in will do just fine. It may not be as exciting, but it will be more consistent. The three high-yield stocks below may not seem exciting, but they can produce large, steady returns over time.
Kinder Morgan Energy Partners
If you're looking for a boring company that's a great investment, look no further than Kinder Morgan Energy Partners (NYSE: KMP), a pipeline transportation and storage company. Don't believe me? Listen to their quarterly conference calls. Snoozefest! Lots of details. Analysts love it for sure, but your average investor could be turned off by it. I like listening to their calls though. It puts my mind at ease about the stock because management clearly knows what they are talking about.
We posted about Kinder Morgan Energy Partners back in June as a great opportunity off their secondary offering. Kinder Morgan made a great run up from the mid $70s to the high $80s, but has since come back down to around $80. Their dividend yield of 6.2% is fair compared to their history. Kinder Morgan has a solid history of raising their dividend, making this stock a great long-term investment.
Kellogg
This cereal and convenience food maker beat analyst estimates on both revenue and income when it reported quarterly results last Thursday. While margins took a hit, Kellogg (NYSE: K) was able to mitigate much of the concerns about rising input costs and struggling economy. Currently their 3.6% dividend yield is high compared to their history. At the same time, their P/E ratio of 15.35 is low relative to their history. The aforementioned economic concerns are providing a good opportunity to get a solid, high-yielding company.
Clorox
The maker of everything from its well-known bleach to household products like Glad and Kingsford to lifestyle products such as Hidden Valley and KC Masterpiece, Clorox (NYSE: CLX) reported earning last week, meeting revenue expectations and beating on EPS. Like Kellogg's earnings, Clorox took a hit on its margins, but still managed to perform well. Also similar to Kellogg, the 3.5% dividend yield for Clorox is historically high and its P/E ratio is fair relative to its history.
Bottom Line
All three companies recently reported good quarterly results and have dividend yields that beat the pants off bonds. A quick look at the charts above show the great returns these companies provided over the past few years at even lower dividend yields. There may not be anything sexy about these stocks, but their returns sure look nice.
Zaegs has no positions in the stocks mentioned above. The Motley Fool owns shares of The Clorox Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
