2 High-Yield Monthly Dividend Stocks to Buy Today

Consider buying shares of these two Canadian dividend-paying companies that generate passive income for investors each month and are trading at a considerable discount.

| More on:
Payday ringed on a calendar

Image source: Getty Images

Dividend stocks are the favourite investment among a number of investors, because in addition to still being exposed to capital gains potential, the investment is also returning money to you.

High-yield dividend stocks take this to another level, and while it’s likely a high-yield dividend stock probably won’t have as much capital gain potential, the returns investors make are still very attractive.

The only thing better than a high-yield, dividend-paying stock is one that pays its dividend monthly as opposed to quarterly, which most companies do.

Receiving dividend payments and your cash back from an investment more often is always nice, plus it allows you to compound your income at a faster pace.

Two top high-yielding dividend companies on the TSX that pay their investors every month are Alaris Royalty (TSX:AD) and Pizza Pizza Royalty (TSX:PZA).

Alaris Royalty

Alaris Royalty is an investment company that finds some attractive investments and deals in small- and medium-sized business. Roughly 84% of its portfolio is in U.S companies with the other 16% coming from Canada.

Alaris is unique in that it works with the companies it’s funding to find a solution that works for both parties. It’s flexible enough to yield to some of the demands of the companies while still gaining equity exposure to the businesses as well as passive-income stream returning cash to it.

The passive income it receives is the number one target for Alaris, which is why it pays out such a large yield and can pay investors monthly. However, just because it aims to receive most of its income passively doesn’t mean that Alaris hasn’t made a fair amount of capital gains profit.

On the 13 investments it’s exited, the company has made an average return of 79%, including three of the investments that had negative returns for Alaris. A 79% average return from investments it’s exited is extremely impressive and goes to show the high-quality investments the business has been finding.

You can gain exposure to Alaris today at just 11.4 times earnings and gain exposure to its attractive dividend yield of roughly 7.4%.

Pizza Pizza

Pizza Pizza Royalty is a restaurant royalty company that receives a royalty on all sales from the Pizza Pizza and Pizza 73 restaurants in the royalty pool.

The stock is trading with a dividend yield of roughly 8.75% as the market decides if its dividend will remain strong. Currently, the payout ratio is right around 100%, so any decline in sales could trigger the company to trim the dividend.

Luckily, Pizza Pizza has a number of intangible factors working in its favour, such as its major brand recognition, its ease and convenience of getting food when other competitors may not be open, as well as its naturally less-expensive choices it offers compared to other fast-food competitors.

The last one could be especially key. As consumers are expected to cut down on their discretionary spending over the short term, businesses like Pizza Pizza will likely be less affected since it offers lower-cost options as opposed to newer and healthier fast-food companies that charge premiums for its offerings.

Although the dividend isn’t completely safe, the company has a cash reserve in case the dividend payments exceed the cash flow that the company is generating on a longer-term basis.

Plus, because it’s receiving a royalty on sales, and sales of fast-food restaurants across the country don’t fluctuate all that much, if the dividend did have to be trimmed, it would only need to be reduced by a very small amount to make the dividend sustainable again.

Bottom line

High-yielding companies always have a large dividend for a reason. The key for investors is to find the risk that exists and then try to quantify that risk to decide if the dividend and investment as a whole is worth it.

Both these companies have risks that are present, but both are strong business with long-term track records of success, so I’d bet on them and gain exposure to these attractive yields before the market catches on and starts to bid up the price of the shares.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of PIZZA PIZZA ROYALTY CORP. The Motley Fool recommends ALARIS ROYALTY CORP.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

2 Dirt-Cheap Dividend Shares I’d Buy for Long-Term Passive Income

Dirt-cheap dividend stocks should be evaluated more thoroughly than their more stable counterparts for long-term dividend sustainability.

Read more »

stock research, analyze data
Dividend Stocks

3 Oversold Dividend Stocks (With a 7% Yield) I’d Buy Right Now

TSX dividend stocks such as Enbridge and TC Energy offer investors dividend yields of more than 7% in 2023.

Read more »

Dividend Stocks

Is it Time to Buy More of Royal Bank of Canada Stock?

With bank stocks down after the fall of three U.S. banks, it might be time to load up on Royal…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Passive Income Portfolio: 4 Dividend Stocks to Get Started

These dividend stocks offer some of the best and most stable passive income out there if you want to get…

Read more »

Dividend Stocks

TFSA Investors: 3 Oversold Stocks That Should Be On Your Radar Right Now

Consider these three oversold stocks if you want undervalued stocks for your self-directed TFSA portfolio.

Read more »

A tractor harvests lentils.
Dividend Stocks

This Dividend Stock Might Be the Best Buy You Make in 2023

A dividend stock just increased its dividend by 12%, and remains a solid long-term buy trading in value territory right…

Read more »

woman data analyze
Dividend Stocks

Better Buy: BCE Stock vs. Telus

What TELUS stock lacks in yield, it makes up for in better capital gains potential over BCE stock.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Turn $10,000 Into $160K in 17 Years Buying 226 Shares in This Stock

Forget about cheap stocks and instead look for stability, which is what you'll get with this company providing strong growth…

Read more »