The Motley Fool

Dividend Sale: 2 Top Stocks for Income Investors

The recent pullback in the market is finally giving investors a chance to buy some first-class names at reasonable prices.

Here are the reasons I think income investors should consider BCE Inc. (TSX:BCE)(NYSE:BCE) and Agrium Inc. (TSX:AGU)(NYSE:AGU) right now.

BCE Inc.

Canada’s largest communications company has always been a favourite with conservative dividend investors, and it still is, but the BCE of today is a very different company than the one grandma invested in 30 years ago. With a focused strategy to dominate the Canadian market at each level of the media and communications value chain, BCE has acquired its way into a very powerful position.

Today the company controls a portfolio of assets that includes a national network of retail stores, professional sports teams, radio stations, television networks, specialty TV channels, and websites. All of this content is distributed to customers via numerous platforms using the company’s world-class wireless and wireline network infrastructure.

The result is a media and communications giant that is well placed to defend its leadership position in a market that, by international standards, has little competition.

For investors, this is a wonderful situation.

BCE recently increased its dividend to $2.60 per share, which currently yields a nice 4.9%. The company expects free cash flow growth in 2015 to be 8-15% and is well within its dividend payout policy of returning 65-75% of free cash flow to shareholders.

Some analysts say the company is a slow-growth business. That might be the case, but slow and steady is a good thing these days, and BCE isn’t sitting back and just counting the money.

In fact, the company just announced a plan to invest $20 billion in capital over the next five years to ensure its customers continue to have access to world-leading broadband technology.

BCE now trades at a reasonable 15 times forward earnings.

Agrium Inc.

Agrium operates wholesale and retail businesses dedicated to supplying the planet’s farmers with the products they need to meet global demand for food. At least for the next 35 years that demand looks set to skyrocket.

As the global population increases from today’s tally of seven billion to an expected 11 billion by 2050, farmers are going to need more of Agrium’s products to meet the higher demands for crops.

In the next 15 years Agrium says the annual consumption of grain and oil seeds will jump by 1.6 billion tonnes and farmers will require an additional 58 million tonnes of its core products: nitrogen, potash, and phosphate.

As one of the world’s largest producers of crop nutrients and the planet’s biggest retailer of seed and crop protection products, Agrium is well positioned to benefit from the demographic trend.

The company just completed a multi-billion dollar expansion at its Vanscoy potash facility and is also increasing its nitrogen capacity. The transition from development to production on these projects means investors should see a flood of free cash flow heading their way in the coming years.

Agrium currently trades at an attractive 11.5 times forward earnings and recently increased its dividend by 12% to US$3.50 per share. The payout yields about 3.3%.

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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. Agrium Inc. is a recommendation of Stock Advisor Canada.

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