BCE (TSX: BCE, NYSE: BCE)

Dividend Yield: 4.7%    Recent Price: C$58/US$44   Fair Value: C$72/US$54

BCE remains one of our best ideas for new money apart from holding the top position in our Dividend Champions portfolio – a position that is well-deserved, given its outstanding history as a profitable operator.

BCE holds a dominant position in the Canadian telecommunications industry, which limits its growth opportunities. However, the company continues to find ways to generate growth either organically or by acquisition.

The relatively safe dividend is expected to continue growing at 5% per year and the attractive yield is 4.7%. The stock has been hurt by expectations of higher interest rates, but we continue to find it undervalued.

Inter Pipeline (TSX: IPL, OTC: IPPLF)

Dividend Yield: 5.6%    Recent Price: C$28/US$21   Fair Value: C$30/US$23

Inter Pipeline is one of the smaller regional Canadian pipeline operators that seem to be able to maneuver their way through the regulatory and environmental minefields in a consistent and profitable way helping to move almost 4 million barrels of oil per day out of the landlocked area.

The profit of the business is mostly derived from cost-of-service or fee-based contracts, which are generally not subject to commodity risk and provide for a relatively stable and low-risk income stream. The company has built up an enviable track record of profitable growth over time and increased its dividend 10% per year over the past 10 years.

The main attraction from a valuation perspective is the current 5.6% dividend yield coupled with reasonable growth over the next two years. We consider the dividend safe given the sound balance sheet and strong cash flow generation and reasonable pay-out ratio.

Power Corporation of Canada (TSX: POW, OTC: PWCDF)

Dividend Yield: 4.5%    Recent Price: C$31/US$23   Fair Value: C$34/US$25

Power Corporation is a family-controlled holding company with major investments in quality life and health insurance and wealth management operations. Key assets that make up the bulk of the asset value of the holding company are indirect investments in publicly listed companies Great West Lifeco and IGM Financial. Insurance contributes 70% of profits and are derived in roughly equal measure from Canada and Europe while the U.S. makes a meaningful but relatively smaller contribution.

The overall business has done well over time with the asset value and dividend per share growing by 7% per year over the past decade. Return on equity averaged just over 10%. This constitutes a very credible performance during a time that includes the global financial crisis.

Investors have ignored the stock for some time now and it hardly participated in the recent rally of insurance companies. Meanwhile the discount to asset value of the underlying assets hovers around 35% on a see-through basis, and the dividend yield is an attractive 4.5%.

Choice Properties REIT (TSX: CHP-U, OTC: PPRQF)

Dividend Yield: 5.2%    Recent Price: C$13/US$10   Fair Value: C$14/US$11

Choice Properties is a core holding in the Dividend Champions portfolio. The REIT was spun out of Loblaw Companies Limited and listed in July 2013. Choice focuses on standalone grocery properties and grocery-anchored shopping centres mostly leased on long-term contracts to Loblaw, a prime Canadian food and drug retailer.

The unit price is down by 11% from its July peak as investors became increasingly concerned about rising U.S. interest rates taking the REIT sectors in both the U.S. and Canada down a few notches. However, we find the 5.2% dividend yield combined with moderate growth attractive even in an environment where interest rates may move higher.