Low interest rates on GICs are forcing investors to turn to dividend stocks for income.
Inter Pipeline flies under the radar of most investors looking for an energy infrastructure income pick, but that might begin to change.
The company owns a diverse line of businesses, including natural gas liquids (NGL) extraction, conventional oil pipelines, oil sands pipelines, and a growing liquids storage operation in Europe.
The balanced nature of the revenue stream has enabled the company to navigate the oil rout in good shape, and management has even taken advantage of the downturn to invest for the future.
The largest purchase came last year when IPL bought two NGL extraction facilities from The Williams Companies for $1.35 billion. The deal was done at an attractive discount to the cost of building the assets, and it comes with plans for a $1.85 billion project.
Inter Pipeline has a strong track record of dividend growth. The current monthly payout of 13.75 cents per share provides a yield of 5.8%.
As new assets go into service, investors should see steady dividend growth continue.
BCE has been a favourite among retirees for decades, and there is little reason for that to change.
The company just completed its acquisition of Manitoba Telecom Services (MTS), which adds more than 700,000 wireless, internet, and IPTV customers to the fold.
The new business, Bell MTS, holds the top position in the Manitoba communications market and is positioned well to expand BCE’s reach into the western provinces.
BCE’s revenue growth might not shoot the lights out, but the company generates significant free cash flow, and that is the key metric for supporting the dividend.
Value hunters should probably search for other opportunities, but BCE offers income investors a safe and reliable 4.9% yield.
A nice combination
Investors who buy an equal weighting in the two stocks can get a nice mix that includes the growth potential of Inter Pipeline with the low volatility of BCE, and they’ll generate a combined yield of more than 5%.
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Fool contributor Andrew Walker has no position in any stocks mentioned.