When it comes to investing, over the course of your investment journey, there are thousands of different choices you can make. The most common decisions are what kinds of TSX stocks you’re going to buy, whether it’s dividend-paying, value, or growth, as well as which actually companies.
While most investors will elect for a combination of stocks, some may want to have mostly all growth stocks or all value stocks. However, it’s crucial that no matter what way you lean in terms of building your portfolio, you make sure to include top TSX dividend stocks.
Dividend stocks are crucial for several reasons. The guaranteed income from the dividend payments is not only nice to receive, but it’s also a game-changer during a bear market or recession. Plus, looking back over the last 50 years, dividend stocks as a whole have far outpaced non-dividend-paying stocks.
This is especially true if you do in-depth research and find stocks with resilient operations. Plus, because the dividend will be so stable, these stocks tend to have less volatility, making them all the more attractive during bear markets and recessions.
While the market is rallying today, the economy is in a much different position. So adding stocks that can provide passive income today is a great way to reduce risk from your portfolio.
There are a tonne of high-quality dividend stocks on the TSX. Whether it’s high-yield companies, growth stocks paying out a small amount or dividend aristocrats raising the dividend every year.
However, one dividend stock thatâs perfect for any investor’s portfolio is Pizza Pizza Royalty Corp (TSX: PZA).
TSX dividend stock
Pizza Pizza is an ideal dividend stock for all investors for several reasons. In addition to the reasons related to its business operations and the potential investors have if they buy it, one of the main reasons why anyone can buy it is because its business is so easy to understand.
Pizza Pizza collects a royalty from all the locations in its restaurant pool from across the country. This royalty is based on the total sales each location does. This is crucial because the royalty company does not rely on the profitability of any location. Furthermore, to increase its revenue and, therefore, its income, it only has to drive additional sales at the restaurants.
This makes Pizza Pizza’s business very easy to understand because it has such low expenses. So, for the most part, whatever the dividend stock gets paid in income essentially all gets paid out to investors.
For that reason, sales numbers, especially same-store sales growth numbers, are the most important factor in Pizza Pizza’s business.
Pizza Pizza today
When the pandemic first hit, many of Pizza Pizza’s dividend-paying peers had to suspend their dividends altogether. While Pizza Pizza also saw a major impact at first, management elected to trim the dividend by just 30%.
That proved to be the perfect amount. It was enough that Pizza Pizza had a margin of safety, but still so little it was clear Pizza Pizza was weathering the storm better than any other restaurant stock.
Since then, its revenue has recovered substantially, and management is already increasing the dividend. This is positive news for investors, as it shows Pizza Pizza is now fully in recovery mode. So as long as it can continue to stay robust, you can expect more dividend increases over the coming months.
Bottom line
Despite a recent dividend increase, the royalty stock is still paying out 20% less than it did before the pandemic, so there is still room to grow. Plus, with its current dividend yielding more than 7.1%, it’s one of the most attractive stocks you can buy today.
