All the money that is fleeing the oil sector has to find a new home. Here are the reasons why BCE Inc. (TSX: BCE) (NYSE:BCE), Bank of Montreal (TSE: BMO) (NYSE: BMO), and Fortis Inc. (TSX: FTS) should benefit.
Canada’s largest telecommunications company looks like the best place right now to get good yield and protect your initial investment. The company has predictable earnings, is insulated from the volatility hitting global markets, and enjoys a competitive advantage in its industry.
BCE is a cash machine. To help ensure this continues, the company recently spent $4 billion to take over its subsidiary, Bell Aliant. Income investors are rubbing their hands together because Bell Aliant’s juicy dividend is now available exclusively for BCE owners.
Additionally, in 2013, BCE bought Astral Media. Astral has a significant presence in the Quebec pay TV market as well as radio, advertising, and other media units. BCE is already getting substantial cash flow from Astral, and that trend should continue as the company’s media division maximizes synergies from the deal.
BCE pays a dividend of $2.48 and yields about 4.6%. Investors should see consistent dividend growth moving forward.
Bank of Montreal
Bank of Montreal is Canada’s oldest bank and has paid out a dividend every year for more than a century. The company has placed a big bet on the recovery in the U.S. economy and that strategy appears to be working out.
BMO originally entered the U.S. Midwest in the early 80’s. They stepped up their presence in 2011, when the bank bought Wisconsin-based Marshall and Ilsley Corp. for $4.1 billion. The deal turned BMO Harris Bank into a major competitor in the Midwestern states where the company is benefitting from the rebound in U.S. manufacturing.
As the price of oil drops, the Canadian dollar is falling with it. In fact, it wasn’t that long ago that the Canadian dollar was at par with the U.S. dollar. Today, the American dollar buys almost $1.14 Canadian.
BMO reports earnings in Canadian dollars and the strong results coming from the U.S. operations will help the bottom line if the Canadian dollar continues to weaken as expected.
Bank of Montreal pays a dividend of $3.12 per share and yields about 3.7%.
Electricity producers might not be exciting, but they have reliable income streams and pay solid dividends that investors can rely on. Fortis owns and operates power-generation facilities in Canada, the U.S., Central America, and the Caribbean.
Fortis recently acquired Arizona-based UNS Energy Corp. for $4.5 billion. The deal will add significant cash flow beginning in 2015 and investors should see consistent dividend hikes as a result of the new revenue stream. As with Bank of Montreal, the strong U.S. dollar will convert to even higher Canadian-dollar earnings.
Fortis pays a dividend of $1.28 and yields about 3.25%.
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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 Andrew Walker has no position in any stocks mentioned.