Income investors have a wide variety of choices in the Canadian market today to help them boost the returns they get on their savings.
Let’s take a look at three stocks that offer solid payouts and above-average yield right now.
Inter Pipeline (TSX:IPL)
Inter Pipeline operates oil sands pipelines, conventional oil pipelines, and natural gas liquids (NGL) processing facilities in Canada. In addition, it has a growing liquids storage business in Europe.
The downturn in the energy sector hit many of the midstream players pretty hard last year, and Inter Pipeline wasn’t spared. The sell-off, however, appears overdone, and investors with a contrarian investing style might want to pick up the stock.
Inter Pipeline is making good progress on the construction of its $3.5 billion Heartland Petrochemicals project. The facility is scheduled for completion in 2021 and should generate annual EBITDA of at least $450 million once it goes into operation.
IPL reported solid Q3 2018 results. Funds from operations hit a record $300 million, representing a gain of 11% over the same period in 2017. Net income jumped 19% to a record $169 million.
The quarterly payout ratio was 55%, giving the company ample room to raise the dividend, even while it works through a large capital program. Management recently raised the monthly distribution from $0.14 to $0.1425 per share. At the time of writing, that provides an annualized yield of 8.1%.
TransAlta Renewables (TSX: RNW)
TransAlta Renewables is majority owned by TransAlta (TSX: TA)(NYSE: TAC) and serves as the subsidiary that holds the renewable energy assets, including wind, hydroelectric and gas-fired power generation.
The company reported steady results for the first nine months of 2018, with adjusted funds from operations increasing $18 million compared to 2017. Cash available for distributions rose 7% over that time frame. Revenue was essentially flat.
During Q4 the company signed a 15-year power supply deal with a major IT customer in the United States for a 90 MW wind facility that will go into operation in the second half of 2019. The company also commissioned the 17.25 MW expansion at its Kent Hills three partnership.
The company raised the payout by 7% in 2017, and the distribution should be safe. Investors who buy today can pick up a yield of 8%.
Keyera (TSX: KEY)
Keyera is a growing midstream operator in the Canadian energy patch with assets that include natural gas and gas liquids gathering, transportation, storage, processing, and marketing.
The company reported distributable cash flow in Q3 2018 of $127 million, or $0.61 per share, compared to $0.57 per share in Q3 2017. The payout ratio for the quarter was 72% and 61% for the first nine months of the year.
Keyera raised the monthly dividend from $0.14 to $0.15 per share last August. The distribution provides an annualized yield of 6.4%.
The bottom line
IPL, TransAlta Renewables, and Keyera pay attractive distributions that should be safe. All three companies appear oversold today and could generate some nice upside gains once sentiment improves in the utility and energy infrastructure sectors.
