Looking for Income? These 2 Top TSX Stocks Have You Covered

Here’s why Enbridge (TSX:ENB)(NYSE:ENB) and Killam Apartment REIT (TSX:KMP.UN) should be on every income investor’s watch list today.

| More on:

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

As growth stocks continue to run into trouble in the markets today, more investors are taking a look at income-producing stocks. And why not? Bond yields are near historic lows, despite rising marginally of late.

Indeed, achieving an ideal mix of income and growth is not that hard for investors who know where to look. Of course, picking the best income stocks is a difficult task. That’s why I’ve picked two of my top dividend stocks on the TSX for investors to peruse and dive into.

For those looking for high-quality, high-yield dividend opportunities, these two companies provide everything long-term investors want. So, let’s dive into it.

Enbridge

For retirees, Enbridge (TSX:ENB)(NYSE:ENB) has been a popular long-term pick. This income stock has done nothing but provide extremely stable and consistent income over the years. And with a current dividend yield around 7.3%, it’s one of the safest high-yielding stocks on the market today.

Wait a second — doesn’t a 7.3% dividend yield imply higher-than-average market risk?

Well, the market seems to think so. Oil prices have fluctuated wildly over the past year, for those who haven’t noticed. Accordingly, the health of Enbridge’s counterparties has fluctuated in step with the markets. Higher counterparty risk has been priced in to account for this reality.

However, of late, higher oil prices have stabilized Enbridge’s oil-producing customers. The pipeline operator’s cash flows have never been more stable. And with the shutdown of the Colonial pipeline due to a high-profile hack showing the economic importance of pipelines, I think Enbridge could get a material valuation boost from investors over time.

Enbridge has also been making active efforts to expand its portfolio beyond its core holdings and assets. Enbridge’s slow transition into renewable energy provides growth prospects for the long term. In fact, I think if the company manages to tap into the core of ESG drive today, investor demand for this stock may finally materialize.

Killam Apartment REIT

As far as income stocks go, REITs are often one place long-term investors look to first. After all, these stocks really trade as bond-like proxies, paying out most of their cash flows as distributions to unitholders.

In the REIT space, Killam Apartment REIT (TSX:KMP.U) happens to be a top pick of mine. This stock has proven to be a high-quality REIT option for long-term investors. And it’s focused on residential real estate in Atlantic Canada — one area I think is relatively undervalued compared to the overall Canadian real estate market.

In this light, investors in Killam are picking up a high-quality 3.6% dividend yield powered by an asset portfolio I view as undervalued. The REIT’s assets have been valued at slightly less than $4 billion, despite this REIT trading at a market cap of $2 billion, at the time of writing. Of course, debt plays into the picture here, but investors are getting what I view as a steep discount relative to Killam’s asset quality right now.

Killam’s cash flow stability and long-term growth prospects make this REIT shine when compared to its peers. Killam currently trades at less than 15 times cash flow, a bargain valuation for investors worried about relative valuations today.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool owns shares of Killam Apartment REIT.

More on Dividend Stocks

Canadian stocks are rising
Dividend Stocks

3 Ways to Invest in Canadian Real Estate Under $20

Real estate can be a great way to make passive income, but you certainly don't have to invest a lot…

Read more »

grow dividends
Dividend Stocks

TFSA Wealth: 2 Oversold Canadian Stocks for a Retirement Fund

These top TSX divided stocks look attractive today for TFSA investors.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Create $1,487 in Passive Income From a Top TSX Dividend and Growth Stock

This top growth stock on the TSX today could bring in almost $1,500 in passive income and triple your investment…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Renters Will Rise in Number vs. Homebuyers in 2022

The greater majority of Canadian renters doubts their ability to purchase a home in 2022 due to surging inflation and…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

West Fraser Stock: A Sneaky Growth Stock No One Talks About

West Fraser (TSX:WFG)(NYSE:WFG) stock has been a sneaky growth stock when it comes to its dividend.

Read more »

Dividend Stocks

Inflation Investing: 2 Top TSX Dividend Stocks to Buy Now

TFSA income investors can get dividend yields of better than 6% to help offset the impacts of high inflation.

Read more »

Canadian Dollars
Dividend Stocks

Got $1,000? Invest it in Real Estate

If you've got an extra $1,000, you should check out cheap REITs like Allied Properties (TSX:AP.UN) for juicy income.

Read more »

Community homes
Dividend Stocks

Real Estate: 2 Top Dividend Aristocrats to Own Today

The recent correction in the real estate sector has made several real estate stocks like these two attractive to income-seeking…

Read more »