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Income Investors: Should You Buy Altagas Ltd. or Corus Entertainment Inc.?

Income investors are searching for attractive dividend stocks to add to their portfolios.

Let’s take a look at Altagas Ltd. (TSX:ALA) and Corus Entertainment Inc. (TSX:CJR.B) to see if one is more attractive right now.

Altagas

Altagas is an energy infrastructure company with assets located in Canada and the United States.

The business has grown over the years through a combination of strategic acquisitions and organic developments, and that trend continues.

Altagas recently announced a deal to purchase U.S.-based WGL Holdings for $8.4 billion. The acquisition is expected to boost annual earnings by 8% through 2021, and management plans to raise the dividend by 8-10% per year over that time frame.

Altagas also has a number of organic growth projects underway in British Columbia, including a new propane export terminal in Prince Rupert, NGL assets in the Montney play, and the expansion of its Townsend facility.

The stock has pulled back a bit on the WGL news, so investors have a chance to pick up the shares near the six-months lows.

The current monthly distribution of $0.175 per share yields 6.7%.

Corus

Corus took a big hit in 2015 as investors bailed out of the stock amid worries that the new TV subscription rules that were coming in March 2016 would threaten the company’s ability to compete.

Management knew something had to be done and, in early 2016, negotiated a deal that totally changed the situation.

What happened?

Corus bought Shaw Media from Shaw Communications in a move that transformed Corus from being a niche content provider heavily targeting kids to a TV powerhouse with roughly 35% of the English language TV programming in Canada.

Is the dividend safe?

Corus pays a monthly dividend of $0.095 per share that currently provides a yield of 8.8%.

The company reported fiscal Q1 2017 net income of $80.7 million, or $0.36 per share. Pro forma year-over-year segment profit slipped 3%, but margins were steady at 41%.

For the moment, it looks like the company is holding its own under the new pick-and-pay TV rules, and thanks to a significant amount of the dividends being issued as new shares, the distribution appears sustainable.

In the latest earnings report, however, Corus indicated it plans to focus on reducing debt in 2017. One way to do this would be to trim the size of the dividend and allocate the cash to help strengthen the balance sheet.

So, investors should keep the possibility of a dividend cut in mind when evaluating the stock as an income pick.

Which company is more attractive?

At this point, I would probably make Altagas the first choice. The business has a solid growth outlook, and investors should see the dividend move higher at a healthy clip over the next five years.

Corus offers the higher yield today, but dividend growth probably isn’t in the cards for the near term. In fact, I wouldn’t be surprised if the current distribution is reduced sometime this year.

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Fool contributor Andrew Walker owns shares of Altagas. Altagas is a recommendation of Stock Advisor Canada.

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