If you’re on the hunt for great income stocks to add to your portfolio in May, then I’ve got two that I think you will love. Let’s take a closer look at each, so you can determine if you should buy one or both today.
Dream Global REIT
Dream Global REIT (TSX:DRG.UN) is one of the largest owners and managers of commercial real estate in Germany and Austria. As of March 31, its portfolio consisted of 169 office, industrial, and mixed-use properties that total approximately 12.92 million square feet of gross leasable area.
Dream Global pays a monthly distribution of $0.06667 per unit, representing $0.80 per unit on an annualized basis, and this gives it a yield of about 8% today.
An 8% yield may cause some investors to question its safety, but you can easily confirm the safety of Dream Global’s yield by checking its distributions as a percentage of its adjusted funds from operations (AFFO), which is a key financial metric for REITs. In its three-month period ended on March 31, its AFFO totaled $27.45 million ($0.22 per unit), and its declared distributions totaled $25.96 million ($0.20 per unit), resulting in a sound 94.6% payout ratio.
On top of being a safe high yielder, Dream Global is known as being a very reliable income provider. It has maintained its current annual distribution rate since its initial public offering in 2011, and I think its strong AFFO growth, including its 24% year-over-year increase to $27.45 million in the first quarter of 2017, and its management team’s positive outlook on its business, thanks to the “continuously improving market conditions in Germany,” will allow it to continue to maintain its current annual distribution for the foreseeable future.
Parkland Fuel Corp.
Parkland Fuel Corp. (TSX:PKI) is Canada’s largest, and one of North America’s fastest-growing, independent markets of fuel and petroleum products. It delivers gasoline, diesel, propane, lubricants, heating oil, and other high-quality petroleum products to motorists, businesses, and wholesale customers across Canada and the U.S.
Parkland currently pays a monthly dividend of $0.09617 per share, representing $1.154 per share on an annualized basis, which gives its stock a yield of approximately 3.95% at today’s levels.
It may not seem completely necessary to confirm the safety of a 3.95% yield, but I think investors should always do so anyways, and this is very easy to do with Parkland, because it provides a cash flow metric called “adjusted distributable cash flow (ADCF)” in its earnings reports. In its three-month period ended on March 31, its ADCF totaled $46.4 million ($0.48 per share), and its dividend payments totaled just $28 million ($0.29 per share), resulting in a conservative 60.3% payout ratio.
Not only does Parkland offer a high and safe yield, but it also offers dividend growth. It has raised its annual dividend payment for four consecutive years, and its 1.8% hike in March has it on pace for 2017 to mark the fifth consecutive year with an increase and also has it on pace for 2018 to mark the sixth consecutive year with an increase.
I think Parkland will continue to deliver dividend growth going forward too. I think its consistently strong growth of ADCF, including its 17.5% year-over-year increase to $46.4 million in the first quarter of 2017, and the vast improvement of its dividend-payout ratio, including 60.3% of its ADCF in the first quarter of 2017 compared with 67.6% in the year-ago period, will allow its streak of annual dividend increases to continue into the late 2020s.
Which of these top income stocks should you buy today?
I think Dream Global REIT and Parkland Fuel represent two of the best long-term income opportunities in their respective industries, so take a closer look at each and strongly consider adding one or both of them to your portfolio today.
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Fool contributor Joseph Solitro has no position in any stocks mentioned.