If you’re a dividend investor, there are many different Canadian stocks to choose from that can help build your portfolio. Plenty of stocks return cash to investors through a dividend, giving you the opportunity to find stocks of all different sizes and strategies.
For example, some dividend stocks are still in growth mode, expanding their operations rapidly and therefore only paying small dividends. Meanwhile, there are plenty of other dividend stocks, such as royalty stocks, that aim to pay essentially all of their earnings back to investors.
This is why dividend stocks are ideal for investors with all types of goals and strategies. If you’re a dividend investor or just looking to boost your income in this environment, here are two top Canadian royalty stocks that offer dividend yields of 6% or more.
A top restaurant royalty stock
If you’re looking to boost your passive income and buy a stock that pays a significant dividend, Pizza Pizza Royalty (TSX:PZA) is one of the best options to consider.
Pizza Pizza is an ideal stock for Canadian dividend investors, because it’s constantly receiving tonnes of cash flow, which it turns around and pays back to shareholders.
Instead of owning the restaurants themselves, it collects a royalty based on all the sales at each of its more than 725 locations across the country.
This means that Pizza Pizza and its investors don’t have to worry about the profitability of the restaurants — only the fact that they are generating and increasing their revenue.
For example, in a typical quarter, Pizza Pizza might earn roughly $9 million in revenue. It then pays selling and general administration expenses, which total less than $200,000.
Then the Canadian dividend stock pays an interest expense, which totals roughly $300,000. After that, all that’s left is to pay taxes, and the remaining cash is its net income.
Over the last four quarters, Pizza Pizza has reported sales of $35 million and a net income after expenses and taxes of almost $27 million — a nearly 80% profit margin.
This is ideal for dividend investors, because it makes Pizza Pizza’s sales and earnings much more reliable. Plus, over the last year, as Pizza Pizza has earned roughly $27 million in net income, it’s also returned roughly $26.5 million to investors through its monthly dividends — essentially, all of its profit.
Therefore, if you’re looking to boost your passive income and buy a high-yield Canadian dividend stock, Pizza Pizza’s 6% yield makes it one of the best stocks to consider.
A top royalty stock that just increased its dividend
In addition to Pizza Pizza, another high-quality Canadian dividend stock with many similarities is Diversified Royalty (TSX:DIV).
Diversified Royalty has a bit more expenses and pays a higher interest expense, but in many ways, is similar to Pizza Pizza, as it constantly pays back tonnes of cash to investors.
The other main difference is that Diversified Royalty owns several different businesses which it receives a royalty from, helping to diversify its revenue streams.
For example, some of the businesses that Diversified Royalty earns a royalty from are Mr. Lube, Oxford Learning, Nurse Next Door, and Sutton Group, just to name a few.
Therefore, because the Canadian dividend stock’s revenue is so diversified, and because it partners with high-quality and mostly defensive businesses, much of the income it receives is reliable.
In fact, the stock just increased its monthly dividend in January — the fourth increase since the pandemic. And today, the stock offers investors a yield of more than 7.1%.
So, if you’re looking to boost your passive income and buy a high-quality dividend stock, Diversified Royalty is certainly one of the best that Canadian investors can consider.