2 Stocks to Splurge on With Your Tax Return

Alaris Royalty Corp. (TSX:AD) and TransAlta Renewables Inc. (TSX:RNW) are catching the fancy of investors not only because of the generous dividends but their thriving businesses.

| More on:
Dollar symbol and Canadian flag on keyboard

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Investors wishing to splurge with their tax returns can do so with high-yield dividend stocks. Two names that would start the ball rolling and set you on cruise control are Alaris Royalty (TSX:AD) and TransAlta Renewables (TSX:RNW). One is a niche play, while the other is a subsidiary of an established IPP.

The common attraction of this pair to investors is the dividend yield of almost 7%. That’s superb and higher than market average. Imagine shelling out less than $20 and receive market-beating returns. However, it’s still your lookout to conduct due diligence prior to making an investment decision.

Business excellence

Alaris is basically a niche play in the credit services industry. This $699.3 million private equity firm is a royalty stream company that forges “partnerships” with private companies. By providing the needed capital to sustain operations, Alaris is paid back in the form of equity dividend distributions.

Ongoing business concerns across all industries need not compromise or muddle their present equity ownership. Alaris participates in the partnership through non-control preferred equity ownership. Corporate partners do not have to yield operational control of the business or expect a change in the corporate culture.

Alaris’s target partners are lower- and middle-market companies. But only companies with proven track records and can show historical free cash flow of more than $3 million can avail of this innovative investment structure. Hence, startups can’t be partners as well. There’s no way business will suffer when the partners are market leaders.

Go green

Six-year-old TransAlta Renewables is a subsidiary of TransAlta Corp. It develops, owns, and operates renewable power-generation facilities. This $3.6 billion company has hydroelectric, wind, and solar facilities plus a solitary natural gas pipeline. The energy is distributed in Canada and Australia.

The prospects are bright for well-run renewable energy companies that value investors are beginning to pump in huge investments. Competition in the renewable energy sector already is heating up. Many governments are shifting to renewable energy and willing to grant subsidies.

That is precisely the reason why investors are suddenly showing heightened interest in TransAlta Renewables. People are expecting an explosion in the renewable energy sector. And it’s only a matter of time. You just look at the increasing demand for alternative and cheaper energy sources. Going green is inevitable.

Optimize your extra income

Alaris will always be on top of its game for as long as it maintains its rigid partner selection process. The company’s profit margin is currently at 66.32%. Meanwhile, TransAlta Renewables is destined to be a crackerjack stock in the very near future. If you’re after a fantastic business with long-term growth potential, RNW is your stock.

Alaris and TransAlta Renewables are not over-performing stocks but undoubtedly two of the most interesting investment choices around. Both pack hefty dividend yields that are hard to dismiss. You have twin opportunities to optimize your extra income and binge on your tax returns.

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 Christopher Liew has no position in any of the stocks mentioned. Alaris is a recommendation of Dividend Investor Canada.

More on Investing

A worker wears a hard hat outside a mining operation.
Dividend Stocks

Canadian Investors: Where to Put $100 Right Now?

Canadian investors can buy shares of lower-priced TSX stocks such as Kinross Gold and AltaGas right now.

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Investing

3 TSX Stocks That Are Fantastic Deals Right Now

Suncor Energy stock is one of the best bargain TSX stocks out there today, with soaring cash flows and dirt-cheap…

Read more »

exchange-traded funds
Stocks for Beginners

2 Canadian Dividend ETFs Perfect for Beginner Investors

These ETFs offer high yields or good dividend growth potential.

Read more »

Path to retirement
Dividend Stocks

Got $5,000? Buy These 2 Stocks and Hold Until Retirement

There are some stellar stocks to buy now and hold until retirement. Here's a look at two options if you…

Read more »

Man holding magnifying glass over a document
Stocks for Beginners

Where to Invest $500 in the TSX Right Now

Here are two TSX stocks to buy regardless of the economy or the stock market.

Read more »

Illustration of bull and bear
Investing

I’m Buying These 3 Resilient Stocks During a Bear Market

Are you worried about bear markets? Don’t be! Instead, buy these three stocks!

Read more »

A plant grows from coins.
Investing

3 Growth Stocks That Could Easily Double in 2022

These growth stocks are going through huge momentum and could easily continue it through 2022 to double in share price.

Read more »

Volatile market, stock volatility
Investing

3 Stocks I’m Buying in This Volatile Market

I'm buying beaten-down tech stocks like Constellation Software (TSX:CSU) during this market correction.

Read more »