Canadians are searching for options to squeeze more income out of their investments.
Inter Pipeline owns natural gas liquids (NGL) extraction facilities, conventional oil pipelines, oil sands pipelines, and a European liquids storage business.
Difficult market conditions in the oil patch have provided some interesting investment opportunities, and Inter Pipeline has taken advantage of the downturn to add strategic assets.
Notably, Inter Pipeline purchased two NGL extraction facilities and related infrastructure from The Williams Companies for $1.35 billion. The deal was done at a significant discount and should generate attractive returns as market prices recover.
Inter Pipeline also has several development projects under evaluation, including a $1.85 billion propane dehydrogenation plant and a $1.3 billion polypropylene facility.
A final decision on the two sites should be made by the middle of 2017. Assuming they go ahead, Inter Pipeline expects the projects to be completed and operational in 2021.
As a result, investors should see cash flow continue to improve enough to maintain steady dividend growth.
Inter Pipeline currently offers a dividend yield of 5.9%.
Altagas recently announced a deal to acquire Washington D.C.-based WGL Holdings for $8.4 billion.
The purchase should close next year and will be immediately accretive to earnings. As a result, management expects to raise the dividend by at least 8% per year through 2021.
Altagas also has a number of organic growth projects underway in British Columbia, including the expansion of its Townsend gas-processing facility, new NGL assets in the Montney play, and a propane export facility in Prince Rupert.
In addition, the company’s new battery-storage facility in California is now in operation.
The stock pulled back on the WGL news, so investors have an opportunity to pick up Altagas at a reasonable price and pocket a nice 6.8% yield.
Is one more attractive?
Both stocks look like solid income picks to hold inside a TFSA. The distributions are expected to increase in the coming years and already provide above-average yields.
If you only buy one, I would probably make Altagas the first choice. The pullback in the stock might be bit overdone, and the U.S. assets provide a nice hedge against turbulent times in Canada.
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Fool contributor Andrew Walker owns shares of Altagas. Altagas is a recommendation of Stock Advisor Canada.