Canadians are searching for a mix of dividend-growth stocks to add to their RRSP investments.
Royal Bank just reported fiscal Q3 net income of $2.66 billion. The stellar result is 7% better than the same period last year and puts the bank on track to break through the $10 billion mark in profits in 2016.
That’s an impressive performance given the challenging economic conditions.
Royal Bank gets a large chunk of its earnings from the Canadian personal and commercial operations, but it also has strong wealth management, capital markets, and insurance divisions.
Going forward, investors should also see strong contributions coming from the United States.
Royal Bank recently spent US$5 billion to acquire California-based City National, a private and commercial bank that caters to high-net-worth clients. The purchase gives Royal Bank a solid platform to expand its presence in the segment, and more deals could be on the way.
Management just hiked the quarterly dividend to $0.83 per share. That’s good for a yield of 4.1% at the current stock price.
Inter Pipeline continues to deliver strong results despite the downturn in the oil sector. As with Royal Bank, a diversified revenue stream is providing support in a challenging market.
The company reported Q2 2016 funds from operations (FFO) of $197 million–up 9% compared with Q2 2015.
Oil sands transportation delivered a 5% gain in FFO compared with Q2 last year. Conventional oil pipelines generated a flat quarter. The natural gas liquids (NGL) extraction business rebounded 31%, and the European storage business delivered a FFO gain of 44%.
Management sees a recovery coming in the niche NGL segment and just signed a $1.35 billion deal to acquire mid-stream assets in the space at a fire-sale price.
The purchase includes two NGL extraction plants and related infrastructure that were being sold by The Williams Companies. Inter Pipeline is buying the assets at a 45% discount to the construction costs, so there is an opportunity to realize some impressive returns when market prices recover.
Inter Pipeline raised its dividend last fall, and investors should see further hikes as the new assets are integrated into the portfolio.
The current monthly payout of $0.13 per share yields 5.5%.
Is one a better pick?
Both stocks are attractive holdings for an RRSP.
Inter Pipeline offers a better dividend yield, and the stock could move significantly higher when the energy sector rebounds. As such, I would probably make the energy infrastructure company my first choice today.