Income investors are always searching for attractive stocks with reliable above-average yield.
Let’s take a look at RioCan Real Estate Investment Trust (TSX:REI.UN) and Altagas Ltd. (TSX:ALA) to see if they are attractive right now.
RioCan
All the news about major department stores going bust is causing a bit of an exodus out of the retail segment of the REIT sector, and RioCan is no exception.
It’s true that online shopping is changing the world of commerce, but calling for the death of the shopping mall might be a bit premature, especially in Canada, where RioCan’s properties are located.
Canadian retailers are selling online, but many have hybrid systems where the customer still drops by the store to pick up the order.
RioCan has a diverse client list, and no single tenant represents more than 5% of its revenue. In addition, the top renters tend to operate in segments that are less impacted by online purchases in this country, including vendors of groceries, pharmaceuticals, discount goods, and everyday household items.
RioCan has done a good job of reducing debt to prepare for rising rates and has a pipeline of development projects on the go to drive future revenue growth.
The company is trading close to its 12-month low and now provides a yield of 5.8%.
Altagas
Altagas operates gas, utility, and power companies in Canada and the United States.
Growth has come from a combination of organic development and strategic acquisitions, and that trend continues.
Altagas is expanding its Townsend gas processing facilities and building a propane export terminal in British Columbia. The company is also in the process of buying Washington D.C.-based WGL Holdings for $8.4 billion.
As the new assets begin to generate cash flow, Altagas expects to raise the dividend by at least 8% per year through 2021.
The stock is down on the WGL news and the broader pullback in the energy sector. At the time of writing, investors can pick up a 7.1% yield.
Is one more attractive?
Both stocks are starting to look oversold, and the distributions should be safe.
Altagas provides a higher yield right now and probably offers better distribution growth over the medium term, so I would make the energy infrastructure company the first pick.
