This 6.3% Dividend Stock Pays Cash Every Month

This Canadian dividend stock could pay you reliable cash every month for decades.

| More on:
woman data analyze

Image source: Getty Images.

After witnessing a decline in 2022, the S&P/TSX Composite Index showed some recovery in 2023. While the benchmark index is recovering, the macroeconomic environment has not changed much. The inflation moderated a bit but remains high. Meanwhile, macroeconomic uncertainties and fear of an economic slowdown indicate that even fundamentally strong stocks could remain volatile, making it challenging for investors to generate capital gains. 

However, on the positive side, Canadian dividend stocks, especially the ones that pay monthly cash, could be solid additions to your portfolio to generate steady income, regardless of the volatility in the market. A steady inflow of dividends boosts your monthly cash balance and enables you to reinvest the same in stocks to create wealth. 

Meanwhile, due to the pullback in the prices of dividend stocks, the yield looks even more attractive, providing an opportunity for investors to shield their portfolios against inflation. 

Against this background, I’ll focus on one of the top Canadian dividend stocks you can buy right now for regular income, irrespective of the volatility in the market.

One dividend stock that pays monthly cash

Before I discuss the stock, let’s be clear that dividends are not guaranteed, and even the safest stock carries risk, and the company could announce a cut in their payouts. Thus, investors must carefully analyze a company’s fundamentals, earnings-growth potential and focus on the payout history before picking the dividend stock. This way, one can ensure a steady monthly cash inflow for years, irrespective of economic cycles.

Speaking of such fundamentally strong companies that pay monthly cash, Keyera (TSX:KEY) comes to my mind. The company operates an integrated energy infrastructure business and could be a great addition to your portfolio for earnings monthly dividend. 

The company has a market cap of approximately $6.9 billion, and its stock has remained relatively stable over the past year, despite the heightened volatility in the market. This signifies the strength of its business model. However, what stands out is its attractive dividend yield of about 6.3% based on the closing price of $30.36 on February 9. 

Why is Keyera a dependable monthly income stock?

Being an integral part of the energy value chain, Keyera witnesses high utilization of its assets. Meanwhile, through its Gathering and Processing and Liquids Infrastructure business, it provides energy infrastructure solutions on a fee-for-service basis. This ensures stability and helps generate solid distributable cash flows (DCF).

Keyera’s dividend payouts are tied to the growth in its DCF. Notably, Keyera’s DCF/share grew at an average annualized rate of 8% from 2008. During the same period, the company raised its dividend by about 7% annually. 

While Keyera has a solid dividend payment and growth history, its target payout ratio of 50-70% of the DCF is sustainable in the long term. 

Keyera’s earnings are growing, reflecting strong demand for its assets. Meanwhile, the company projects its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to grow at an average annualized rate of 6-7% through 2025. 

Meanwhile, its KAPS (Key Access Pipeline System) is 90% complete and will be operational soon, providing additional growth opportunities for the company. 

Bottom line 

Keyera’s high-quality assets, strong balance sheet (low leverage ratio of 2.9 times net debt/adjusted EBITDA), growing earnings base, and sustainable payout ratio make it a reliable stock to earn passive income every month. 

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Keyera. The Motley Fool has a disclosure policy.

More on Dividend Stocks

analyze data
Dividend Stocks

How Much Do You Need to Invest to Give Up Work and Live Only Off Dividend Income?

Here's an honest assessment of how difficult it is to achieve "quit-your-job" levels of passive income.

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Dividend Stocks With Seriously Huge Payouts

The TSX telecom sector has some great high-yielding companies up for grabs.

Read more »

TFSA and coins
Dividend Stocks

Dividend Stocks With Yields TFSA Investors Should Lock In Now!

Are you looking to build a passive-income stream? Here are two top dividend stocks to load up on in your…

Read more »

A plant grows from coins.
Dividend Stocks

2 Young TSX Stocks You’ll Be Glad You Bought in 10 Years

Youth means nothing when you plan to hold strong companies long term. These two TSX stocks should therefore be first…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

Is it a Trap? 3 TSX Stocks With Ultra-High Dividend Yields 

Who doesn’t love dividends? But the high-interest rate environment makes ultra-high dividends unsustainable. Are these stocks a value trap?

Read more »

Value for money
Dividend Stocks

3 Value Stocks for Superior Returns in 2023

Given their solid underlying businesses, stable cash flows, high dividend yields, and attractive valuations, these three undervalued TSX stocks could…

Read more »

Financial technology concept.
Dividend Stocks

2 TSX Value Stocks to Buy for Peace of Mind (and a Crazy-Good Deal)

2 TSX stocks that could outperform in the long term.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 of the Best Canadian Dividend Stocks I’d Buy Before March 2023 Ends

Here are two of the best Canadian dividend stocks you can buy on a dip in March 2023 to hold…

Read more »