Finding big yield with limited risk is becoming difficult, but there are still attractive picks out there for savvy income investors.
Here are the reasons why I think RioCan Real Estate Investment Trust (TSX:REI.UN) and Inter Pipeline Ltd. (TSX:IPL) deserve to be on your radar.
RioCan
RioCan own more than 300 shopping malls across Canada.
There are constant rumblings about the impending death of brick-and-mortar stores, but the hoopla appears overblown, and RioCan’s results suggest things are just fine in the Canadian mall business.
RioCan reported Q1 funds from operations (FFO) of $148 million, up 4.8% on a per-unit basis compared with the same period last year.
Demand remains strong for the company’s space with one million square feet renewed during the quarter at an average rent increase of 6.2%.
RioCan counts many of the country’s most established retailers as anchor tenants, and these businesses tend to operate in recession-resistant sectors. Grocery stores, pharmacies, and discount goods retailers are just a few examples.
The company recently sold its 49 U.S.-based locations for a tidy profit. Management is using the money to reduce debt and invest in new growth opportunities.
One interesting project is a plan to build condos at some of the top urban retail sites. If the idea takes off, RioCan’s investors could see new revenue stream emerge to support distribution growth in the coming years.
RioCan isn’t as cheap as it was earlier this year, but investors who buy now can still pick up a solid 4.8% yield.
Inter Pipeline
Inter Pipeline lies in the shadows of its larger peers, but investors are doing themselves a disservice by ignoring the stock.
The company operates a diversified business portfolio that includes NGL extraction, conventional and oil sands pipelines, and a Europe-based liquids storage business.
The NGL extraction group has struggled a bit amid the downturn in the energy sector, but the other segments are performing very well.
Inter Pipeline reported solid Q1 2016 results. The company generated FFO of $186 million, up 5% from Q1 2015.
The oil sands transportation division saw FFO increase 7% on the back of new assets and strong throughput. The conventional oil pipelines also saw FFO increase 7% compared with last year as growth continues in the Viking oil play in Saskatchewan.
In Europe, the bulk liquids storage business is enjoying utilization rates of 98%. Additional capacity is now online and that drove FFO up 53% in the Q1 as compared with the first quarter of 2015.
Inter Pipeline raised its monthly payout last November. The current dividend of 13 cents per share yields 5.6%.
As the energy sector continues to recover, investors should see the stock move higher.
