Canadians are searching for attractive dividend stocks to add to their RRSP portfolios.
Altagas just announced a game-changing acquisition that should ensure strong dividend growth for years to come.
The company is buying U.S.-based WGL Holdings Inc. for $8.4 billion in a deal that will grow the company’s asset base to $22 billion and boosts the development portfolio to more than $7 billion.
Altagas expects the deal to close in the first half of 2018, and it should deliver average earnings per share accretion of at least 8% through 2021.
As a result, management sees annual dividend growth coming in at 8-10% through 2021, while reducing the payout ratio.
The current monthly dividend of $0.175 per share yields 6.75%, so investors are already getting a juicy return with strong growth prospects on the horizon.
Adding WGL to the portfolio should provide more stability to overall cash flow, as the business derives significant revenue from regulated assets.
Inter Pipeline owns and operates natural gas liquids (NGL) extraction facilities, conventional oil pipelines, oil sands pipelines, and a liquids storage business based in Europe.
The company has weathered the storm in the oil patch quite well and has taken advantage of the downturn to position itself for growth.
IPL recently concluded its $1.35 billion purchase of two NGL extraction facilities from The Williams Companies. The assets were sold at a significant discount, so IPL stands to reap some impressive returns when the market recovers.
IPL also picked up a $1.85 billion propane dehydrogenation development project in the deal that could be completed and generating revenue by 2021.
In addition, IPL just purchased the remaining 15% of the Cold Lake pipeline system it didn’t already own for $527.5 million. The company will also build a new $125 million pipeline to connect to the Kirby North oil sands facility, and it’s evaluating the construction of a $1.3 billion polypropylene plant.
In Europe, IPL continues to expand its liquids storage facilities to meet near-record demand for its services.
The stock pays a monthly dividend of $0.135 per share. As new assets are completed and go into service, investors should see steady annual dividend growth.
The distribution currently provides a 5.7% yield.
Is one a better bet?
Both stocks offer solid above-average yield and should prove to be reliable buy-and-hold RRSP picks.
Altagas took a bit of a hit on the WGL announcement, so the stock looks quite attractive at the current price. If you only buy one, I would probably go with Altagas today.
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Fool contributor Andrew Walker owns shares of Altagas. Altagas is a recommendation of Stock Advisor Canada.