Canadian pensioners used to rely on GICs and savings accounts to provide the yield they need to help pay bills or cover winter trips to someplace warm.
Unfortunately, those days are long gone and unlikely to return anytime soon, so retirees are turning to REITs and dividend stocks to fill the gap.
RioCan is squarely focused on the Canadian retail market with more than 300 shopping centres spread out across the country.
The company used to have properties in the United States as well, but it recently sold off the 49 sites for a tidy profit and is putting the $1.2 billion in net proceeds to good use.
RioCan has reduced its debt level to the point where it now boasts its lowest leverage in the company’s history. This is important because REITs with oversized debt loads are often hit the hardest when interest rates rise.
RioCan is also using the additional funds to finance new growth opportunities. One project includes a plan to construct up to 10,000 residential units at the company’s top urban locations.
The program is in its early stages, but investors could see a nice boost to cash flow if the concept takes off in the coming years.
RioCan pays a monthly distribution of 11.75 cents per unit. The 12-month payout ratio at the end of Q2 was down to 90% from 94.5% at the same time the previous year, so the metric is moving in the right direction.
The current yield is 5.2%.
Inter Pipeline owns oil sands infrastructure, conventional oil pipelines, natural gas liquids (NGL) extraction facilities, and a Europe-based liquids storage business.
The diversified revenue stream has helped the company navigate the oil rout reasonably well, and management continues to invest for future growth.
The company recently signed a $1.35 billion agreement to purchase NGL assets and related infrastructure from The Williams Companies. The acquisition is at a 45% discount to the construction cost of the assets, so there is an opportunity for some decent returns when market prices recover.
Inter Pipeline raised its monthly dividend to $0.13 per share last November. Once the new assets are integrated into the portfolio, investors could see another increase in the payout.
Inter Pipeline currently yields 5.7%.
Is one a better bet?
Both stocks pay large distributions that should be safe. If you simply want the best yield and think the energy sector is on the cusp of a recovery, go with Inter Pipeline.
Otherwise, RioCan looks like a solid pick today.
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Fool contributor Andrew Walker has no position in any stocks mentioned.