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Income Investors: 2 Unloved High-Yield Stocks to Put on Your Radar

Finding quality income stocks at reasonable prices is getting difficult in the current market.

Let’s take a look at Altagas Ltd. (TSX:ALA) and RioCan Real Estate Investment Trust (TSX:REI.UN) to see if one is an attractive pick today.

Altagas

Investors who are searching for an energy infrastructure name to add to their portfolios often skip Altagas, but the company has some interesting growth prospects that warrant more attention.

What’s going on?

Altagas recently announced plans to acquire U.S.-based WGL Holdings for $8.4 billion. The deal, which is expected to close next year, will be immediately accretive to earnings and further diversifies the company’s asset portfolio.

In addition, Altagas has several development projects underway in British Columbia, including a propane export terminal in Prince Rupert, an expansion of the Townsend gas-processing facility, and new liquids separation infrastructure in the Montney region.

On the other side of the country, Altagas is developing a natural gas storage facility in Nova Scotia.

The company says these projects, combined with additional revenue from the WGL purchase, should provide enough cash flow growth to support annual dividend increases of at least 8% through 2021.

The stock has been under some pressure since the WGL deal was announced. At the current price, investors can pick up a 6.8% dividend yield.

RioCan

Concerns about rising interest rates and ongoing difficulties faced by major department stores have put pressure on RioCan over the past nine months, but the pullback might be overdone.

Why?

Higher rates can be a headwind for the REIT sector, but RioCan’s management team is doing a good job of reducing debt. In fact, the company’s leverage ratio at the end of 2016 was at 40% — down from 46% at the same time the previous year.

Regarding the retail industry, some companies are certainly struggling, but demand remains strong for any space that gets vacated in RioCan’s locations.

Committed occupancy was 95.6% at the end of Q4 2016, and RioCan has new tenants in place, or under negotiation, to replace more than 120% of the revenue lost when Target closed its Canadian operations.

On the development side, RioCan ended 2016 with ownership interests in 15 development projects that will boost the company’s retail space by 3.8 million square feet.

RioCan is also in the early stages of a plan to construct up to 10,000 residential units at nearly 50 of its prime properties over the next decade. If the concept takes off, investors could see a nice boost to cash flow in the coming years.

RioCan pays a monthly distribution of 11.75 cents per unit. At the current price, investors get a 5.4% yield.

Is one a better bet?

Both companies should be solid buy-and-hold income picks.

At this point, Altagas offers a higher yield and will likely provide better distribution growth over the medium term. As such, I would probably make the energy infrastructure company the first choice today.

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

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