There is nothing common between Altagas Ltd. (TSX:ALA) and Alaris Royalty Corp. (TSX:AD).
These Canadian companies are in different line of businesses, attracting different classes of investors. But when it comes to their dividend yields, both companies have one thing in common: they offer an extremely attractive yield.
Let’s find out which company offers a better risk/reward equation if you are looking to invest in stocks that offer high dividend yields.
Alaris
Alaris is a Calgary-based provider of cash financing to private businesses across North America that don’t want to lose equity ownership and operational control. In return, Alaris gets a monthly cash distribution from these companies.
These distributions to Alaris are based on the yield on the original contribution and are set 12 months in advance and adjusted annually based on the business performance.
Offering a 7.8% dividend yield annually, the company has an impressive history of rewarding its investors with 10 consecutive hikes in payouts since 2010. Alaris boosted its monthly dividend by 93% during that period, currently paying a $0.14-a-share monthly distribution.
Trading at $20.75 apiece, Alaris shares have generated 15% annualized total returns since 2008.
Altagas
Altagas is an Alberta-based, diversified energy infrastructure company, focusing on natural gas gathering, processing, transmission, and storage. The company also produces clean power with more than 1,688 MW of gross capacity in North America. Altagas-owned utilities are serving over 575,000 customers in North America.
Over the last five years, Altagas has grown its asset base to over $10 billion from just $3 billion.
Altagas is another high-yielding stock, offering 7.4% return on its shares, which translates into a $0.175-a-share monthly distribution.
During the five-year period until 2016, the company has delivered a total shareholder return of 31%, or 6% per annum.
Which one is better?
Both companies have solid footings in their respective sectors with a reliable track record of rewarding their shareholders.
Altagas shares are under pressure, since the company announced an $8.4-billion acquisition of the U.S.-based utility, WGL Holdings, early this year. Investors didn’t like this deal on concerns that it would add more debt on the company’s balance sheet and dilute existing shareholders.
Alaris is in a risky business, where a couple of sour deals could disrupt its dividend distribution. That’s why Alaris shares have been so volatile if you look at their performance over the past five years.
For risk takers, both companies offer good rewards in terms of higher yields. I don’t see any major threats to their cash flows in the near future. You can start with small positions and grow them over time as you deepen your understanding of these businesses.
