Investing in quality dividend stocks allows you to generate steady cash flows over time. There are few stocks on the TSX that pay investors monthly dividends. Here, we’ll look at three cheap stocks Canadians can buy to generate a predictable income stream each month.
Keyera
An energy infrastructure company, Keyera (TSX:KEY), returned 13.4% to investors in 2022. However, it’s also trading 10% below 52-week highs and offers investors a dividend yield of 6.2%. Keyera currently pays investors monthly dividends of $0.16 per share.
In 2021, Keyera increased revenue by 65.5% year over year to almost $5 billion, while adjusted earnings surged 400% to $1.40 per share. Now, analysts tracking Keyera stock expect earnings to rise by 32% in 2022, suggesting its price-to-earnings multiple of 16.9 is very reasonable.
Keyera has a strong balance sheet, allowing the company to distribute monthly dividends. Its dividend payouts have increased by 25% in the last six years. Investors can brace for further increases in dividends, as Keyera is forecast to increase earnings by 14% annually in the next five years.
Savaria
One of the top-performing stocks on the TSX, Savaria (TSX:SIS) has returned 1,380% to investors since August 2012. Savaria is a global leader in the accessibility industry and provides solutions for the physically challenged and the elderly. It has a comprehensive set of products with three business segments that include Accessibility, Patient Care, and Adapted Vehicles.
Savaria has a global manufacturing network with 15 plants across Canada, the U.S., Europe, and China.
Savaria pays investors a monthly dividend of $0.042 per share, indicating a forward yield of 3.5%. Its dividend has increased by 7% annually in the last five years.
Savaria’s revenue in Q1 of 2022 rose 63.8% year over year to $183.5 million due to its acquisition of Handicare.
Analysts tracking Savaria expect earnings to rise by 94% in 2022 and 25% in 2023. Given its robust earnings expansion, Savaria is trading at an attractive price-to-earnings multiple of 20. The stock also trades at a discount of 50% to average analyst price target estimates.
Pembina Pipeline
Another energy stock that makes the list is Pembina Pipeline (TSX:PPL)(NYSE:PBA). A Canada-based pipeline company, Pembina, has a monthly dividend payout of $0.21 per share, suggesting a dividend yield of 5.5%.
Pembina Pipeline started paying investors a dividend back in 1998. In the last decade, these payouts have risen at an annual rate of 5%. Pembina is well poised to maintain or even increase its payouts, even if market conditions deteriorate, as it derives 88% of cash flows from fee-based contracts. Its payout ratio is also sustainable at less than 60%.
Pembina has an investment-grade balance sheet providing it with additional financial flexibility. The company has a large pipeline of projects that should expand its base of cash-generating assets and fuel dividend increases in the future. Pembina recently disclosed a joint venture where it will merge its Western Canadian processing assets with an infrastructure fund. Once the deal is closed, Pembina will increase dividends by 3.6%.
The Foolish takeaway
Investors seeking passive income can use this article as a starting point to identify fundamentally strong stocks that pay monthly dividends. For example, an investment of $5,000 in each of these three stocks will let you generate over $60 in dividends each month.
