This Wall Street favorite is a very solid energy play for more conservative investors. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.
Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.
Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.
Valero Energy stock investors receive a 6.55% dividend. The very bullish BofA Securities analysts have a $75 price target. The consensus target is lower at $61.28, and shares were last trading at $59.87.
This is a large net lease real estate investment trust (REIT) with an incredible distribution for income buyers. W.P. Carey Inc. (NYSE: WPC) ranks among the largest net lease REITs, with an enterprise value of approximately $17 billion and a diversified portfolio of operationally critical commercial real estate that includes 1,163 net lease properties covering approximately 131 million square feet.
For over four decades, the company has invested in high-quality single-tenant industrial, warehouse, office and retail properties subject to long-term leases with built-in rent escalators. Its portfolio is located primarily in the United States and northern and western Europe, and it is well diversified by tenant, property type, geographic location and tenant industry.
While real estate is struggling somewhat now, net lease REITs generally rent properties with long-term leases (10 to 25 years) to high credit-quality tenants, usually in the retail and restaurant spaces. “Net lease” refers to the triple-net lease structure, whereby tenants pay all expenses related to property management: property taxes, insurance and maintenance.
Investors receive a 6.09% distribution. BofA Securities has set a $77 price target. The consensus target is $76, and W.P. Carey stock closed most recently at $68.59.
Note that any of or all these companies could at one point cut their dividends. With that in mind, investors have a chance to buy all five at discount pricing with huge dividends payouts. Even if recovery in the share prices takes a while, the high dividends will make the wait more than tolerable. Investors should also remember that MLPs and REITs have distributions that may contain return of principal.