Once in a while investors find themselves with a bit of extra cash. It could be from a bonus at work, a tax refund, or the sale of another asset. Spending the windfall might be the first instinct, and there is nothing wrong with treating yourself a bit, but the smarter option might be to put it in a TFSA and buy some reliable dividend stocks.
Here are the reasons why I think investors should consider RioCan Real Estate Investment Trust (TSX:REI.UN) and Bank of Montreal (TSX:BMO)(NYSE:BMO) right now.
RioCan
RioCan controls 293 retail properties across Canada and 47 more south of the border. The malls are home to some of the retail industry’s top companies and, despite the concerns about competition from online shopping, people still love the mall experience.
The stock has been under pressure this year as investors adjust to the surprise failure of Target in Canada as well as fears about an ugly Canadian recession. That seems to fly in contrast to what RioCan’s numbers are telling us.
The company reported solid Q2 2015 results with funds from operations of $136 million, a solid 7% increase over the same period last year. Tenants don’t seem too bothered by the economic outlook. In fact, RioCan renewed 1.1 million square feet of retail space in Q2 at an average rent increase of 9.8%.
RioCan is a well-run company and management has a very keen understanding of the market. That’s why the company is considering the option to lock in gains on its U.S.-based properties through a possible sale. If that happens, existing unit holders could see a special distribution.
Another item to watch is the company’s move to build condos on its sites. The experiment is still in its early stages, but the idea holds promise and could result in a boost to cash flow if it is rolled out on a larger scale.
RioCan pays a distribution of $1.41 that yields 5.8%. The payout should be very safe.
Bank of Montreal
The market is worried about the broader economic impacts of the weakness in Canada’s oil patch, and this is putting pressure on the banks. Bank of Montreal is attractive right now because it offers investors a diversified revenue stream through its extensive U.S. operations.
The bank has more than 600 U.S.-based branches located in the Midwest region of the country. The economic recovery continues south of the border, and that is showing up in BMO’s numbers. In the most recent quarter, the U.S. operations reported a year-over-year jump in net income of 38%, driven by a 14% increase in commercial and industrial loans as well as the effects of the strong U.S. dollar.
Bank of Montreal offers a dividend of $3.28 per share that yields 4.8%. The company has made a payment every year since 1829, so investors should be comfortable with the safety of the distribution.
