My 5 Favorite Dividend Stocks

 | Oct 06, 2017 | 1:00 PM EDT
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Despite all the theoretical arguments that can be made against companies paying dividends, the fact remains that some shareholders like having capital returned to them. It puts them in the driver's seat in terms of what to do with their distributions -- spend, reinvest into shares, or repurpose elsewhere.

Here are five of my current favorite dividend payers:

  1. Corning, Inc  (GLW) . Currently yielding just over 2%, this is an example of a company that has combined dividend increases with stock buybacks, which can be a powerful combination, under the right circumstances. Corning has raised its dividend at a 21% compound annual growth rate over the past six years, and reduced shares outstanding by more than 40%. What's more, with $4.2 billion in cash, there should be room to do more of both.
  2. CoreCivic, Inc  (CXW) . Not without a great deal of controversy, this private-prison real estate investment trust currently yields 6.6% and has come through one of several rough patches in its history over the past year. This one is not for the faint of heart. It is at the center of a polarizing political issue -- of whether for-profit prisons have a place in our society. With shrinking state budgets, and the potentially lower costs offered by private corrections, I believe they are here to stay. We'll see. This time last year, markets were trumpeting their demise.
  3. Getty Realty Corp  (GTY) . The second REIT on the list, this gas station/convenience store name also had its share of troubles several years back. But has emerged and is expanding its territory. Currently yielding 3.8%, dividends have been on the upswing since bottoming in 2012. If you like real estate, and want some diversification, Getty owns more than 800 gas station and convenience store properties -- and growing. Hopefully the dividend will continue to, as well.
  4. Cracker Barrel Old Country Store, Inc  (CBRL) . Overall, I've made it quite clear that I am not crazy about the restaurant space. But this one, in my view, is a cut above many others. It has a cult-like following among some restaurant-goers -- including a couple I recently heard about that has been to all 645 or so locations. The company owns the land and buildings for 418 locations, has just $400 million in debt and has morphed into a distribution machine over the past several years, paying regular quarterly dividends of $1.15, plus a special cash dividend ($3, $3.25 and $3.50 over the past three years). Last year's dividends totaled $8.15, for a trailing 5.3% yield. There are no guarantees that the special dividends will continue. The mistake I made with CBRL over the years was in my form of ownership. Several years ago, I believed the cheapest way to gain exposure was via Biglari Holdings (BH) , which amassed a 20% stake in the company. Over the past five years, BH shares are down slightly, while CBRl is up more than 250%, and that does not count dividends. Ironically, BH tried to implement change at CBRL, pushing the notion that it was not well run.
  5. FreightCar America, Inc  (RAIL) . Perhaps a bit odd for this list, but this small name is a dividend payer, and one of my favorite stocks. Currently yielding 1.8%, it has not increased the dividend in three years. However, it is awash in cash and securities, with $10.76 a share, and trades at just 1.55x net current asset value. After several lean quarters, business appears to be improving -- and if that continues, RAIL could increase the dividend, repurchase a boatload of shares, or both. That is, if someone does not take the company out, which would not surprise me.

There you have it, a rather eclectic list of my five favorite dividend payers, with an average yield of 3.9%. There are a few others that are even more controversial, which I may share in an upcoming column.

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