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Making exciting returns from boring companies

The highest returns over the long term can often be found in the most boring of companies. For example, some of the major wealth creators in the US market over the last 50 years, were in fact, tobacco companies.

The most exciting companies are usually popular. This popularity drives up share prices and dilutes future returns. So even if the company performs as hoped, investors may receive an average return because all the hype was baked into the share price.

Here are two boring companies which have been outstanding long-term performers…

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

I don’t think anyone could argue Soul Patts is an exciting company. But what this investment conglomerate has done for shareholders over the long term is incredible.

Over the last 40 years, Soul Patts has shown a return of 16.4% per annum. Not only that, it has increased the dividend every year since 2000.

The businesses it owns aren’t exactly cutting edge – building materials, telecommunications, mining, and financial services – but they’re very profitable for Soul Patts. Recently the company announced another increase to the dividend as Group Regular Profit after tax climbed by 17.4% over the year.

Shares currently trade on a dividend yield of 2.2%, or 3.1% grossed up.

Accent Group Ltd (ASX: AX1)

Accent operates a number of footwear businesses, focusing on niche sectors such as performance and active lifestyle footwear. It distributes brands such as Hype, Skechers, Platypus and many more. The company has almost 450 stores and is working hard on its omni-channel offering to fight against the threat of online retail.

Footwear might not be exciting, but in this case, the results speak for themselves. Accent is so far proving doubters wrong and continuing to generate growth in sales and profit. In fact, earnings-per-share has roughly doubled in the last 5 years, while dividends are up by 68%. Over the last 10 years, shares in Accent have returned 29% per annum.

The threat of Amazon remains for retailers such as Accent, JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN). In Accent’s case, the company is quickly gaining traction with its own digital sales plan. Shares currently trade on a dividend yield of 4.3%, or 6.1% grossed up.

Foolish takeaway

There’s no need to find the next big thing to get rich investing in shares. You can make plenty of money in boring companies. Sticking to quality dividend-paying shares with a solid track record makes the most sense to me.

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Motley Fool contributor Dave Gow owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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