Once in a while, dividend investors find themselves with a bit of extra cash to invest in their favourite income stocks.
Here are the reasons why I think BCE Inc. (TSX:BCE)(NYSE:BCE) and RioCan Real Estate Investment Trust (TSX:REI) are attractive picks right now.
BCE
Canada’s top telecom provider just gets bigger and better every year.
The latest move by management is a $3.9 billion deal to acquire Manitoba Telecom Services. The purchase is raising some eyebrows, and pundits are debating whether or not the deal will go through, but BCE knows the game and has already announced asset sales to help pave the way for an approval.
The company will sell some of the MTS mobile assets to Telus in an agreement that essentially carves up the Manitoba market into three relatively equal chunks with Rogers holding the other significant share.
Manitobans shouldn’t expect lower telecom prices, but BCE plans to invest $1 billion over the next five years to upgrade the MTS network. The company will also roll out its popular Gigabit Fibe Internet service, which delivers Internet speeds up to 20 times faster than the existing MTS offering.
BCE recently reported solid Q1 2016 results, and the company is on track to deliver free cash flow growth of 4-12% this year. That’s good news for income investors because it means more dividend growth should be on the way. The stock currently offers a yield of 4.5%.
BCE isn’t a cheap stock, but it’s a low-volatility pick you can buy and simply forget about for decades.
RioCan
RioCan owns more than 300 shopping malls in Canada and is in the process of selling its 49 U.S. properties.
The anchor tenants in Canada are large, well-established businesses operating in recession-resistant segments. They tend to be grocery stores, pharmacies, discount retailers, and big outfits that sell the everyday stuff Canadians always seem to need.
RioCan doesn’t have trouble finding demand for its locations. The company successfully replaced Target at locations vacated by the U.S. retailer and renewed one million square feet of space in Q1 2016 at an average rent increase of 6.2%.
Proceeds from the sale of the U.S. assets will be used to reduce debt and invest in growth opportunities. One interesting project is the construction of condo units at some of the prime urban properties. If the concept takes off, RioCan’s investors could see a nice boost to the distribution.
Bargain hunters have driven RioCan’s stock up a long way in recent months, but the REIT still looks attractive and currently offers a 5% yield.
