Top Monthly Dividend Stocks in Canada

Investors looking for a steady stream of income can turn to companies with a reliable streak of monthly dividend payments. Although limited, there are some quality monthly dividend stocks on the TSX Index. 

However, not all monthly dividend payers make good investments. As we’ve seen, several companies have already cut their dividends. Therefore, it is best to be selective and ensure that the monthly dividend is sustainable. 

Most real estate investment trusts (REITs) pay monthly dividends, but there exists tremendous uncertainty in the sector. Given this, today’s focus will be on monthly dividend stocks from other industries — those with attractive yields and a dividend that is well covered. 

A high-yield, monthly dividend stock

The midstream industry is another where you will find several monthly dividend stocks. Among the best is Pembina Pipeline (TSX: PPL)(NYSE: PBA) and its attractive 7.89% yield.

Admittedly, Pembina may carry additional risk. The price of oil continues to trade near decade lows, and the energy industry is collapsing. Despite this, pipelines are better positioned to weather a prolonged bear market than producers. 

Pipelines aren’t as susceptible to spot oil prices, as their cash flows are underpinned by long-term, take-or-pay contracts. At Pembina, 85% of EBITDA fell into these categories and 80% of customers are investment grade. 

In its April update, Pembina announced that it currently has $2.3 billion in cash on hand. Despite the current disruptions, management expects to maintain the monthly dividend. The company is guiding to payout ratios of only 70-75% of cash flows and 60% of earnings in 2020. 

Pembina is also a Canadian Dividend Aristocrat and has an eight-year dividend-growth streak. It last raised dividends along with the closing of the Kinder Morgan Canada and Cochin pipeline acquisition. Don’t expect any further raises over the short term — the company stated it has no intentions of further raising the dividend in 2020 — a cautious and prudent approach.

In today’s environment, it is difficult to analyze dividend safety. However, Pembina’s management has a proven track record and as such, it makes for an excellent monthly dividend stock.

A growing renewable energy utility

Where else can investors find safe and reliable income? The utility industry. Although most pay out quarterly, leading renewable energy producer Northland Power (TSX: NPI) is an excellent choice for those looking for monthly dividends. 

Northland sports a strong dividend yield (4.02%) that is well covered by operating cash flows and earnings with payout ratios of only 20% and 71% respectively. This is in line with industry averages. 

Impressive growth will also underpin the dividend over the short and long term. Over the past five years, earnings have grown at an annual rate of 13%, and Northland is expected to generate similar annual growth (11%) over the next five years. 

The company is quickly becoming a leading power producer in Latin America. In mid-January it closed on its EBSA acquisition, which adds a new market (Colombia) and a regulated utility to its portfolio of assets. 

The deal will be immediately accretive to EBITDA by approximately $100 million. Likewise, it will lead to mid-single digit accretion to free cash flow per share through 2023. Beyond 2023, management expects the deal to yield even greater benefits. 

Northland Power is a safe and reliable monthly dividend option for investors.