Forget GICs and Savings Accounts: Buy These 2 Income Stocks Instead

Instead of settling for the minuscule yields offered by GICs and savings accounts, investors should buy income stocks such as Canadian REIT (TSX:REF.UN) and Enbridge Income Fund Holdings Inc. (TSX:ENF).

The Motley Fool

Many investors are turning to monthly dividend stocks to supplement their income, because savings accounts and Guaranteed Investment Certificates (GICs) simply do not offer yields anywhere close to what can be earned in the stock market. With this in mind, let’s take a closer look at two high-quality stocks with yields up to 5.8% that you could buy right now.

1. Canadian REIT

Canadian REIT (TSX:REF.UN) is one of Canada’s largest diversified REITs. It has ownership interests in 197 industrial, retail, office, and development properties, comprising of approximately 32.8 million square feet located across the country.

It currently pays a monthly distribution of $0.1525 per share, or $1.83 per share on an annualized basis, which gives its stock a high yield of about 3.7% at today’s levels. This yield is also very safe when you consider that its adjusted funds from operations (AFFO) totaled $1.35 per share and its cash distributions totaled just $0.905 per share in the first half of 2016, resulting in a very conservative 67% payout ratio.

Investors must also make the following two notes about Canadian REIT’s distribution.

First, it has raised its annual distribution for 14 consecutive years, the longest active streak for a REIT in Canada, and its 1.7% hike in May has it on pace for 2016 to mark the 15th consecutive year with an increase.

Second, I think its consistent AFFO growth, including its 3.9% year-over-year increase to $1.35 per share in the first half, and its very conservative payout ratio, including the aforementioned 67% in the first half, could allow its streak of annual distribution increases to continue for the foreseeable future.

2. Enbridge Income Fund Holdings Inc.

Enbridge Income Fund Holdings Inc. (TSX:ENF) holds a 56.6% ownership stake in Enbridge Income Fund, which is a major owner of energy infrastructure in North America, including oil and natural gas pipelines, oil storage facilities, and green power-generation facilities. Its investment leads to stable and predictable cash flows, much of which is paid out to its shareholders in the form of monthly cash dividends.

It currently pays a monthly dividend of $0.1555 per share, or $1.866 per share on an annualized basis, which gives its stock a very high yield of about 5.8% at today’s levels. This yield is also very safe when you consider that its earnings totaled $119 million and its dividend payments totaled just $103 million in the first half of 2016, resulting in a rock-solid 86.6% payout ratio.

Investors must also make the following two notes about Enbridge’s dividend.

First, it has raised its annual dividend payment for five consecutive years, and its two hikes since the start of 2015, including its 10% hike in September 2015 and its 10% hike in January of this year, have it on pace for 2016 to mark the sixth consecutive year with an increase.

Second, it has a dividend-growth target of 10% annually through 2019, and I think its very strong earnings growth, including its 91.9% year-over-year increase to $119 million in the first half, and its reduced payout ratio, including 86.6% in the first half compared with 87.1% in the year-ago period, will allow it to achieve this target.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »