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2 High-Yield Stocks With Strong Dividend Growth

Income investors are always searching for top dividend stocks that offer attractive yields and distribution growth.

Let’s take a look at Enbridge Inc. (TSX:ENB)(NYSE:ENB) and TransAlta Renewables Inc. (TSX:RNW) to see why they might be interesting picks.

Enbridge

Enbridge closed its $37 billion purchase of Spectra Energy earlier this year in a deal that created North America’s largest energy infrastructure company.

Spectra added important natural gas assets to go along with Enbridge’s heavy focus on liquids pipelines. Spectra also provided a nice boost to the capital plan.

In fact, Enbridge says it has about $31 billion in near-term projects under development. As the new assets are completed and go into service, the company expects cash flow to increase enough to support dividend growth of at least 10% per year through 2024.

The stock has pulled back more than 12% in 2017, giving investors an opportunity to pick up the pipeline giant at an attractive price.

At the time of writing, Enbridge provides a dividend yield of 4.9%.

Tough times in the broader energy sector and concerns about rising interest rates might keep the stock from moving significantly higher in the near term.

However, the strong dividend-growth outlook means investors are looking at impressive returns on their initial investment today, even if the share price doesn’t increase.

TransAlta Renewables

TransAlta Renewables owns wind, hydroelectric, and gas-fired power generation facilities.

The company reported solid Q2 2017 results, with comparable EBITDA coming in at $98 million compared to $89 million in the same period last year. Adjusted funds from operations were $0.29 per share, compared to $0.25 per share in Q2 2016.

The company recently completed its South Hedland gas-fired project in Australia, which is expected to contribute $80 million in EBITDA per year.

As a result of the addition of South Hedland to the revenue stream, TransAlta Renewables raised its dividend by 7%.

At the time of writing, the new distribution provides a yield of 6.6%.

Is one more attractive?

Both stocks provide above-average dividends with solid track records of distribution growth.

Enbridge is starting to look oversold and probably offers better dividend-growth prospects over the medium term, so I would likely make the pipeline giant the first choice today.

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Fool contributor Andrew Walker owns shares of Enbridge. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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