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If You Like Dividends, You Should Love These 3 Stocks

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I have a confession. I love dividend stocks. There is something reassuring about receiving those dividend payments: No matter what a company's stock price is doing, the payments can help keep you from making an irrational decision at the worst time.

Also, it's hard to argue with the power of reinvested dividends over time. Making the most of your dividend investments means investing in top-quality stocks that have the ability to stand the test of time and pay you an ever-increasing amount of cash. 

So let's take a look at three companies that fit this bill rather well -- Holly Energy Partners (NYSE: HEP), National Grid (NYSE: NGG), and Cintas (NASDAQ: CTAS) -- and see why you might want to consider them for your own portfolio. 

HEP Total Return Price data by YCharts.

A master limited partnership you can rely on

Not all master limited partnerships are alike. There are a few distinct traits that separate the great MLP investments from the average ones. One of the better investments in this industry is Holly Energy Partners.

What makes Holly Energy rather special compared to so many others is the way its parent organization, HollyFrontier Corp. (NYSE: HFC), manages it. The company's business is a very predictable one, as it owns several pipelines and storage tanks that are used to source crude oil for HollyFrontier's oil refineries, or distribute refined petroleum products to wholesale customers. It also helps that 100% of Holly Energy Partners' services are fee-based contracts, so there is no direct exposure to oil and gas prices.

The way Holly Energy Partners manages its capital also makes it compelling. Too many general partners make risky moves like trying to pay out too much of the company's cash flow, or relying too much on debt and equity markets to fund their expansion. Holly Energy Partners, in contrast, is known for being conservative with both its payout and its debt levels. This past quarter was a great example: The company's distribution coverage ratio -- the most common metric for measuring an MLP's dividend sustainability -- was 1.67. In an industry where a coverage ratio of 1.2 or greater is considered excellent, Holly Energy Partners is giving itself plenty of room to grow its payout in the future, as well as reinvest in the business. I should also note that past quarter was the 46th consecutive quarter with a distribution increase. 

Despite this rather solid reputation, shares are trading at a pretty attractive price. Shares of Holly Energy Partners today carry a 6.1% distribution yield. That's a decent yield for a solid, reputable dividend payer.

Adding a little power to a dividend portfolio

Investors like utility stocks because they are regulated businesses that face little competition. However, even utilities can be impacted by the ups and downs of commodity prices. That is what makes National Grid such an interesting investment for dividend investors. Unlike most utilities which sell a product like electricity, gas, or water to customers, National Grid just owns the distribution infrastructure that delivers electricity and gas. The company's bread-and-butter business is owning transmission lines in the U.K. and the U.S. and charging power generators and utility companies to use the network. Think of it as a tollbooth business model that generates gobs of cash that can be given back to shareholders.

One thing to note is that the company doesn't pay a consistent quarterly dividend. Rather, the company pays two biannual dividends, one of which -- the interim dividend -- is considerably lower than the annual dividend. However, over the years these two dividends have increased on an annual basis that mostly tracks the United Kingdom Retail Prices Index. 

The company's dividend yield has been on a bit of a decline in recent years and investors have pushed up the price of the stock, but shares of National Grid still yield 4.3% today. No one would blame you if you waited for a pullback in this stock because of that decline in yield, but today's yield is still a pretty good entry point.

Good things come to those who wait

Everyone wants to get in on exciting businesses that are changing the way we do things or disrupting an industry. The irony is that some of the best investments are the ones which many would consider boring. Take, for example, Cintas. The company's bread-and-butter business is uniform and floor-mat rental for businesses and professionals. Call it boring all you want: It's a business that has generated incredible returns on equity for more than 25 years. That sort of performance won't bore your portfolio. 

CTAS Return on Equity (TTM) data by YCharts.

Cintas has a very low dividend yield of 0.98%, which may not sound like much for a dividend stock, but keep this in mind: The company has more than doubled its dividend in the past 10 years. 

If you want to really get a deal on shares of Cintas, one thing to remember is that the company's business very much follows unemployment trends -- higher unemployment means fewer uniforms needed means lower profits. If you are a patient investor, you can wait for a time of higher unemployment to get a better price on the stock, but the company's high rate of returns suggests that it's a decent addition to anyone's portfolio.

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Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com or on Twitter 

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The Motley Fool recommends Cintas and National Grid. 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.