2 Dividend-Growth Stocks Yielding 7%

Here’s why Altagas Ltd. (TSX:ALA) and TransAlta Renewables Inc. (TSX:RNW) might be worth a closer look.

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Income investors are searching for high-yield stocks with growing dividends.

Let’s take a look at Altagas Ltd. (TSX:ALA) and TransAlta Renewables Inc. (TSX:RNW) to see why they might be interesting picks today.

Altagas

Altagas owns gas, power, and utility businesses in Canada and the United States.

The company has grown over the years through a combination of organic projects and strategic acquisitions, and that trend continues.

Altagas recently finished an expansion at its Townsend gas-processing facilities and is making good progress on its North Pine NGL development and Ridley Island propane export terminal.

On the acquisition front, Altagas is working through its $8.4 billion purchase of Washington, D.C.-based WGL Holdings.

The deal is supposed to close next year, and Altagas expects the resulting cash flow growth to support annual dividend increases of 8% for 2019-2021.

Investors are somewhat concerned the company might not find buyers for non-core assets it hopes to sell to cover part of the WGL purchase. As a result, the stock is down about 15% in 2017, and that’s after a nice rebound in the past three months.

More gains could be on the way.

Altagas recently reported strong earnings from the existing assets and raised the dividend by more than 4%, so management can’t be too worried about future cash flow.

At the time of writing, Altagas provides a yield of 7.5%.

TransAlta Renewables

TransAlta Renewables is majority owned by TransAlta Corp. and serves as a drop-down subsidiary for the parent company’s green-energy assets, which include wind, hydro-electric, and gas-fired power-generation facilities located in Canada and Australia.

TransAlta Renewables completed its South Hedland power development earlier this year and said the facility should boost EBITDA by $80 million per year.

When the commissioning of South Hedland was announced, TransAlta Renewables bumped up the dividend by 7%.

The current distribution provides a yield of 7.3%.

Is one more attractive?

Both stocks pay above-average dividends that should be safe.

If you are looking to add just one to your portfolio, I would probably go with Altagas as the first choice. The stock looks oversold, even after the recent rally, and investors should see strong dividend growth continue over the medium term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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

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