Canadian investors are searching for attractive stocks to put in their TFSA portfolios.
Let’s take a look at RioCan Real Estate Investment Trust (TSX:REI.UN) and Inter Pipeline Ltd. (TSX:IPL) to see why they might be interesting picks.
RioCan
RioCan owns interests in more than 300 retail properties across Canada. The company’s malls are located at some of the top commercial real estate in the country and count several of Canada’s top brands as core tenants.
With weekly announcements about major retailers closing stores, it makes sense that investors might be a touch concerned about RioCan’s fate.
The business certainly isn’t risk-proof, as we saw with the exit of Target Canada, but RioCan’s properties remain in high demand, and the large tenants that sell groceries, pharmaceutical products, discount goods, and everyday household items are unlikely to suffer the same fate as other segments in the retailer sector.
RioCan has a strong development portfolio of 15 retail locations as well as a plan to build as many as 10,000 residential units at its prime sites over the next decade.
The residential project is still in its early stages, but investors could see a nice boost to revenue in the coming years if the concept takes off.
RioCan has done a good job of reducing its debt ahead of expected increases in U.S. interest rates. In fact, the leverage ratio is now down to about 40%, making RioCan one of the lowest-levered REITs in Canada.
The company currently pays a monthly distribution of 11.75 cents per unit. That’s good for a 5.3% yield.
The payout looks safe, and investors could see an increase once the development projects begin to generate revenue.
IPL
IPL own natural gas liquids (NGL) extraction assets, conventional oil pipelines, oil sands pipelines, and a liquids storage business located in Europe.
The diversified revenue base has helped the company navigate through the oil rout in good shape, and management has even taken advantage of the downturn to invest for future growth.
IPL bought two NGL extraction facilities and related infrastructure from The Williams Companies for $1.35 billion. The company also acquired the remaining stake it didn’t already own in the Cold Lake pipeline system and has several organic developments underway.
IPL reported record funds from operations of $255 million in Q4 2016, representing a 20% increase over the same period the previous year.
IPL pays a monthly dividend of $0.135 per share for a yield of 5.8%.
The payout ratio was 58% in Q4, so the distribution appears safe, and investors should see additional increases as the development projects are completed and go into service.
Is one a better bet?
Both companies offer attractive yields with distributions that should be safe.
At this point, IPL probably offers better dividend-growth potential in the medium term, so I would go with the pipeline company as the first choice today.
