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Retirees: 2 High-Yield Dividend Stocks for Your TFSA in 2018

Canadian retirees are searching for high-yield stocks to boost the return they get from their hard-earned savings.

One popular strategy involves holding the securities inside a Tax-Free Savings Account (TFSA). This makes sense, as the full value of the distributions can go straight into your pocket.

That’s right; the tax authorities don’t share any of the returns.

Buying stocks carries risk, but the returns investors get from GICs are so low that it makes sense to shift some funds to dividend-paying equities.

The market is full of companies that provide returns of 3.5-4.5%. If you can stomach a bit more volatility, here are two names that offer significantly more return on your investment today.

Inter Pipeline Ltd. (TSX:IPL)

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

The company has navigated through the oil rout in pretty good shape, and management has even taken advantage of the downturn to add strategic assets at attractive prices.

The largest deal involved the purchase of two NGL extractive facilities and related infrastructure from The Williams Companies for $1.35 billion. The deal was done at a significant discount to the cost of building the plants, so IPL could see strong returns on the investment.

In addition, the company just announced plans to go ahead with its $3.5 billion Heartland Petrochemical Complex, which should be completed by the end of 2021.

As a result, revenue and cash flow could get a nice boost in the coming years to support continued dividend growth.

IPL just raised its monthly payout to $0.14 per share. That’s good for a yield of 6.5%.

Altagas Ltd. (TSX:ALA)

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 developments and strategic acquisitions, and that trend continues.

Altagas recently completed its Townsend expansion and new North Pine projects, and is making good progress on the Ridley Island propane-export terminal.

In addition, Altagas is working through its $8.4 billion purchase of Washington D.C.-based WGL Holdings. The WGL deal is expected to close in 2018.

The stock came under pressure in 2017 amid concerns that the company is biting off more than it can chew with the WGL purchase. Only time will tell, but the existing assets are performing well and the recently completed projects came in ahead of schedule and under budget.

Altagas just raised the dividend by 4%, so management can’t be too concerned about the revenue and cash flow outlook. In fact, the company expects to boost the payout by at least 8% per year between 2019 and 2021 once the WGL deal is closed.

The stock provides a 7.7% yield at the time of writing.

The bottom line

High-yield stocks can provide a nice boost to overall returns, but they also tend to carry more risk, so investors should make sure they are part of a balanced portfolio.

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Fool contributor Andrew Walker owns shares of Altagas.


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