Altagas Ltd. and Enbridge Inc.: Dividend-Growth Stocks for Your TFSA

In a market that keeps getting more expensive, where it is becoming increasingly difficult to find stocks that are attractively valued, it’s nice to know that investors can turn to the good, old, reliable utility names.

The following two companies are not only reliable and stable, but they also offer growth in the form of growing earnings and dividends. These companies have made returning cash to their shareholders a top priority, and they are doing a great job at it.

Let’s look at Enbridge Inc. (TSX:ENB)(NYSE:ENB) first.

With a dividend yield of 4.96% and a stable and reliable history, Enbridge is a utility for investors who are concerned with stability, reliability, capital preservation, and income.

Since 1996, investors have enjoyed 22 years of dividend increases, with a 33% dividend increase in 2015, a 14% increase in 2016, and a 15% increase expected in 2017. Management expects the dividend to increase at a 10-12% cumulative average growth rate from 2017 to 2024.

This will be supported by organic growth opportunities, such as the Spruce Ridge gas pipe expansion in B.C. and continued streamlining of the business to achieve $540 million in cost synergies and $240 million in tax synergies related to the Spectra Energy merger, which was completed in February 2017. The key is that this growth will be achieved through the company’s low-risk business model.

Longer term, the Spectra Energy acquisition affords Enbridge with greater scale and diversity, strengthens the company’s balance sheet and funding flexibility, and provides attractive synergies.

Altagas Ltd. (TSX:ALA) shares currently presents as a good opportunity for the investor that can see beyond the immediate uncertainty. The shares have declined 39% in three years and 17% since the beginning of this year. The good part to this is that new investors can get into this stock, which is now trading at a 7.25% dividend yield.

The $8.4 billion WGL acquisition, which will add additional high-quality assets and give the company a significant footprint in the U.S. and Canada, has left investors with many questions. The approval process is slow and uncertain, the closing date is uncertain, although management expects that final approvals will come in during the first half of 2018, and the implementation of financing is also a big uncertainty.

At the end of the day, however, the deal is accretive to earnings and cash flow and brings with it a plethora of growth opportunities. The company has identified $5 billion in immediate growth opportunities plus an additional $2 billion in opportunities through to 2021.

And a strong second quarter, which saw the company increase its dividend and raise its outlook for 2017 was just the beginning of what is to come.

Investors can expect an 8-10% growth rate in dividends for a payout ratio of between 50% and 60% until 2021. Management pointed out that the decision to raise the dividend is not based on the closure of any transaction, but a function of financial results and growth of existing operations.

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Fool contributor Karen Thomas does not own shares of any of the companies listed in this article. The Motley Fool owns shares of Enbridge. Altagas and Enbridge are recommendations of Stock Advisor Canada.

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