If you’re interested in supplementing your income in 2017 by investing in monthly dividend stocks, then you’ve come to the right place. Let’s take a closer look at two high-quality stocks with yields up to 8.1% that you could buy right now.
Parkland Fuel Corp.
Parkland Fuel Corp. (TSX:PKI) is one of the leading providers of gasoline, diesel, propane, lubricants, heating oil, and other high-quality petroleum products to businesses and consumers across Canada and the U.S. Its portfolio of brands includes Sparlings Propane, Nord-Ouest, Bluewave Energy, Farstad Oil, Superpumper Stations, Pioneer Energy, Fas Gas Plus, and Race Trac.
Parkland currently pays a monthly dividend of $0.0945 per share, representing $1.134 per share on an annualized basis, giving its stock a beautiful 4.1% yield today.
It’s of the utmost importance to always confirm the safety of a stock’s dividend before investing, and this is very easy to do with Parkland, because it provides a metric called “distributable cash flow (DCF)” in its earnings reports. In its nine-month period ended on September 30, its adjusted DCF totaled $109.4 million ($1.15 per share), and its dividend payments totaled just $81.6 million ($0.85 per share), resulting in a rock-solid 74.6% payout ratio.
Not only does Parkland offer a high and safe yield, but it also offers dividend growth. Fiscal 2016 officially marks the fourth consecutive year in which it has raised its annual dividend payment, and its 5% hike back in March has it positioned for 2017 to mark the fifth consecutive year with an increase.
I think Parkland’s dividend-growth potential is very promising going forward as well. Its very strong growth of adjusted DCF, including its 14.4% year-over-year increase in the first nine months of 2016, and the additional growth that will come from its $965 million acquisition of the majority of CST Brands, Inc.’s Canadian assets, which is expected to close in the first quarter of 2017, will allow its streak of annual dividend increases to continue through 2025 at the very least.
Veresen Inc. (TSX:VSN) is a major owner and operator of energy infrastructure in North America. Its portfolio of assets includes a natural gas pipeline, an ethane pipeline, a natural gas liquids extraction facility, gas processing facilities, gas-fired, run-of-river, wind, and waste heat power-generation facilities, and a district energy system.
Veresen pays a monthly dividend of $0.0833 per share, representing $1.00 per share on an annualized basis, and this gives its stock a massive 8.1% yield today.
As mentioned previously, it’s very important to always confirm the safety of a stock’s dividend, and this is very easy to do with Veresen because it too provides a DCF metric in its earnings reports. In its nine-month period ended on September 30, its DCF totaled $276 million ($0.90 per share), and its dividend payments totaled just $230 million ($0.75 per share), resulting in a very healthy 83.3% payout ratio.
On top of having a high and safe yield, Veresen is known as being a very reliable income provider. It has maintained its current annual dividend rate since 2007, and I think its consistently strong generation of DCF, including its projected $1.12-1.16 per share in 2016 and its projected $1.00-$1.14 per share in 2017, will allow it to continue to do so for another decade.
Is one a better buy than the other?
I think both Parkland Fuel and Veresen represent great long-term investment opportunities for income investors. With this being said, I do not prefer one to the other, so I’d either buy both or flip a coin to pick between them.
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
Fool contributor Joseph Solitro has no position in any stocks mentioned.