The Motley Fool

Canadian Income Investors: 2 Monthly Dividend Stocks Yielding 6.5-7%

Income investors are searching for reliable dividend stocks to hold inside their Tax-Free Savings Accounts.

The strategy is a wise one, as the TFSA protects all earnings and gains from the taxman.

Let’s take a look at Inter Pipeline Ltd. (TSX:IPL) and Altagas Ltd. (TSX:ALA) to see why they might be interesting picks today.

IPL

The oil rout has taken a toll on most names connected to the energy sector, and IPL has not been spared.

The stock is down 15% in 2017 and is now trading at a 12-month low.

IPL owns natural gas liquids extraction assets, conventional oil pipelines, oil sands pipelines, and a liquids storage business in Europe.

The diversified revenue stream has enabled the company to weather the downturn in decent shape, and management has taken advantage of the tough times to add strategic assets at attractive prices.

As a result, IPL is positioned well to benefit when energy prices recover. In addition, the company has about $3 billion in development projects under consideration that could provide a strong boost to cash flow in the next few years.

IPL continues to raise its dividend every year. The Q1 2017 payout ratio was 61%, so there is ample room for increases, even if cash flow remains stable.

The current monthly dividend of $0.135 per share provides an annualized yield of 6.5%.

Altagas

Altagas has also come under pressure in recent months, providing investors with an opportunity to pick up the stock at a reasonable price.

The company owns gas, utility, and power assets in Canada and the United States, and continues to grow through strategic acquisitions and organic projects.

Altagas is in the process of buying Washington D.C.-based WGL Holdings for $8.4 billion in a deal that should provide earnings per share accretion of at least 7%.

The deal is expected to close in 2018.

Altagas also has a number of internal projects on the go, including the expansion of its Townsend gas processing facility and the construction of a propane-export terminal in British Columbia.

In addition, Altagas is a player in the battery storage sector with its facility located in California.

Management expects to raise the dividend by at least 8% per year through 2021 as the new assets begin to contribute cash flow.

The current monthly dividend of $0.175 per share provides an annualized yield of 7%.

Is one more attractive?

Both stocks provide attractive dividends that should be safe. If you want U.S. exposure, go with Altagas. If you like IPL’s diversification into the European liquids storage business, the shares are worth considering at the current price.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share. Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune. Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.