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Altagas Ltd.: This 9.35% Yielder Is a Must-Own Stock for Your TFSA

The cumulative amount of room that is available for Canadians to invest in their Tax-Free Savings Accounts (TFSA) is now $57,500.

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Here are two dividend-paying stocks that have seen weakness in their stock prices, so now is a good time to snatch them up at a bargain.

Altagas Ltd. (TSX:ALA)

Altagas is a real, massive opportunity.

The stock that has been hit this year along with the rest of the market and utilities stocks, but much more so. It has dropped a whopping 22% year to date in what could only be called an unwarranted move.

The market has become more jittery and nervous, and yes, Altagas certainly has its issues, like the WGL acquisition and the uncertainties with regard to funding and its closing date.

But look, we are getting paid a 9.35% dividend yield to wait and bear this uncertainty, and this is a fair trade-off, in my view.

And, at the end of the day, the company is seeing strong operational momentum, as evidenced by fourth-quarter results that showed normalized cash flow from operations that was 4% higher than the same period last year, with a very healthy payout ratio of well under 60% and good liquidity.

The stock is trading below book value and reflecting a lot of bad news related to this uncertainty, but if the deal closes, and when the funding question gets settled, investors can look forward to the WGL acquisition’s high-quality assets and market position to bring Altagas many growth opportunities as well as significant earnings and cash flow accretion, and a sharp rally in the stock price.

The company reiterated its confidence in a mid-2018 closing of the WGL acquisition, and in the 2018 sale of $2 billion of its assets to help fund the acquisition.

Algonquin Power and Utilities Corp. (TSX:AQN)(NYSE:AQN)

Algonquin Power’s shares have fallen 7% year to date, as weakness in the market took its toll. But now we are left with an opportunity.

With a dividend yield of 4.65%, Algonquin is paying investors handsomely, while giving them exposure to a North American utility company that has approximately 25% of its operating profits coming from clean energy (wind, hydro, solar).

Investors also get stability and predictability with this stock, as roughly 90% of its power generated is sold under long-term contracts with an average term of 16 years.

Algonquin had a very solid 2017 and finished off the year with fourth-quarter EBITDA of $221 million, a 77% increase over the same period last year.

Going forward, investors can expect a 10% annual dividend increase, as per the company’s target, and a future that will benefit from a strong development pipeline, particularly in the renewables space.

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Fool contributor Karen Thomas has no position in any of the stocks mentioned. Altagas is a recommendation of Stock Advisor Canada.

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