Canadian retirees will find the winter holiday in the U.S. a bit more expensive this year, and that means the dividend income from their stocks has to be reliable.
But where should they look to get good yield that is also safe?
The best companies to own are solid businesses that have long track records of paying rising dividends. Ideally, they also operate in sectors with limited competition.
If you are looking for decent yield and don’t want to waste valuable pool time analyzing the markets, I think Fortis Inc. (TSX:FTS) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are solid picks.
Fortis
Fortis owns electricity generation and natural gas distribution assets in the U.S., Canada, and the Caribbean.
Regardless of what happens to the economy or the global financial market, people still have to turn on the lights, cook their meals, and keep the house heated or cooled. This might not be too exciting, but it is exactly what the doctor ordered if you are an income investor.
More than 90% of the company’s revenue comes from regulated assets, so cash flow and earnings are fairly predictable. That’s pretty tough to beat if you are looking for stable income.
Fortis is always on the lookout for attractive deals that can boost returns for shareholders.
Management recently locked in some nice profits through the sale of its hotel and commercial real estate holdings, and the move has given the company extra funds to invest in new assets or pay down debt.
Last year, the company spent $4 billion to acquire Arizona-based UNS Energy. The integration of the assets has gone well, and Fortis just raised the quarterly dividend to $0.375 per share.
The company has increased the payout every year for more than four decades, and the current distribution yields about 4%.
Bank of Montreal
Dividend investors often skip Bank of Montreal when considering a financial company for their portfolios, but that might be a mistake.
The bank offers investors a balanced revenue stream from retail, wealth management, and capital markets activities, as well as a 600-branch operation in the United States. The diversification by segment and geography is helping the bank navigate through some tough economic times in the Canadian market.
Bank of Montreal reported Q3 net income of $1.23 billion, a 6% increase over the same period last year. The U.S. group had a particularly strong quarter with adjusted net income rising 36% to $186 million.
The company recently announced a deal to purchase GE Capital’s commercial truck financing business, and that should help drive even better results from the company’s solid commercial banking operations.
Bank of Montreal pays a quarterly dividend of $0.82 per share that yields 4.4%. The bank has given its shareholders a piece of the profits every year since 1829.
