Canadian investors are searching for top dividend stocks to put inside their Tax-Free Savings Accounts (TFSA).
The strategy is a popular one, as low interest rates on GICs force investors to search for yield in other investments.
Inside the TFSA, the dividends and capital gains are protected from the taxman, so investors can pocket or reinvest the full value of their returns.
Let’s take a look at Altagas Ltd. (TSX:ALA) and Inter Pipeline Ltd. (TSX:IPL) to see why they might be interesting picks.
Altagas
Altagas just reported record numbers for Q1 2017. Normalized EBITDA came in at $228 million in the first three months of this year, representing a 28% increase over the same period in 2016.
During the quarter, the company announced its $8.4 billion acquisition of Washington D.C.-based WGL Holdings.
The deal, which is expected to close in the first half of 2018, adds strategic utility, midstream, and clean power assets in the United States.
Altagas also has a number of organic development projects on the go in Canada, including a natural gas storage facility in Nova Scotia as well as gas and propane projects in British Columbia.
As the new assets begin to generate revenue, Altagas expects cash flow to increase enough to support dividend growth of at least 8% per year through 2021.
The current monthly payout of $0.175 per share provides an annualized yield of 6.8%.
Inter Pipeline
IPL owns natural gas liquids (NGL) extraction assets, conventional oil pipeline, oil sands pipelines, and a liquids storage business based in Europe.
The company purchased two NGL facilities and related infrastructure last year for $1.35 billion from The Williams Companies in a deal that saw the assets sold to IPL at a significant discount to the construction costs. As market prices improve, IPL could see solid returns on the investment.
IPL also has more than $3 billion in development projects under consideration. Assuming the company secures the required contracts from customers, the facilities could be completed and generating revenue by the end of 2021.
IPL has a steady track record of dividend growth. The monthly distribution provides an annualized yield of 5.8%.
Is one more attractive?
Both stocks are solid high-yield picks with growing dividends and attractive development portfolios.
Altagas sold off in the wake of the WGL announcement, giving investors a chance to pick it up at a reasonable price. The stock offers the higher yield right now and provides exposure to the U.S. market, so I would probably make Altagas the first choice.
