There are plenty of Canadian stocks to buy that dividend investors can consider adding to their portfolios. And although there are many dividend stocks to choose from, some of the best stocks that pay out nearly all their earnings and are made specifically for dividend investors are royalty stocks with ultra-high yields.
Royalty companies generate consistent cash flow by collecting royalties from their underlying assets or partnerships, making them ideal for income-focused investors. With impressive yields, strong performance, and often lower volatility, royalty stocks offer an attractive combination of income and growth potential, especially in the current environment.
If you’re looking to boost your passive income with some of the top high-yield stocks on the TSX, here are three of the best Canadian dividend stocks you can buy — all with yields of at least 6.3%.
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A top restaurant royalty stock for dividend investors
One of the top industries where you can find royalty stocks offering high dividend yields is the restaurant sector. And while there are a handful of restaurant royalty stocks to choose from, one of the best to buy for significant and consistent dividends is Pizza Pizza Royalty (TSX:PZA).
Pizza Pizza is attractive, because the stock earns a royalty from all the sales done at its restaurants across the country. Therefore, from quarter to quarter and year to year, the average level of sales doesn’t typically fluctuate very much, resulting in stable and predictable revenue for the company.
And because Pizza Pizza only has minimal administration expenses, the majority of its revenue flows through to the bottom line, where it’s paid back to investors.
In addition, because Pizza Pizza is a quick-service restaurant and more of a low-cost option for consumers, Pizza Pizza is typically more defensive than its restaurant royalty stock peers.
For example, while many cut their dividends significantly during the pandemic or suspended them altogether, Pizza Pizza only had to reduce its dividend by 30%, and even that was being conservative.
If you’re looking for a top Canadian dividend stock to buy now that can help boost your passive income immediately, Pizza Pizza’s dividend currently offers a yield of 6.3%, and the stock returns cash to investors monthly.
A top Canadian energy company
Another industry where there are several top royalty stocks to choose from is energy. And if you’re looking for a high-yield stock with attractive long-term growth potential, Freehold Royalties (TSX:FRU) is an ideal company to consider.
The stock earns royalties from all the oil and gas that other energy companies produce on Freehold’s land. Therefore, it’s constantly earning revenue and, similar to Pizza Pizza, has fewer expenses than non-royalty companies in its industry.
Therefore, Freehold earns tonnes of free cash flow each quarter, which it also uses to pay back investors monthly. Furthermore, its dividend is now yielding upwards of 7.2%.
And because Freehold aims to pay out just 60% of its free cash flow, not only does that keep the dividend safe, but it also allows Freehold to build up a cash reserve, which it can use to acquire more land and expand its portfolio to ultimately increase the value of the stock for investors.
Therefore, Freehold is one of the top dividend stocks that Canadian investors can buy for their portfolios today.
A royalty stock with a 7.8% dividend yield
Lastly is Diversified Royalty (TSX:DIV), a stock that doesn’t operate in any particular industry, like Pizza Pizza or Freehold. Instead, it acquires royalty interests from a variety of different industries to build a diversified portfolio, as its name suggests.
Diversified Royalty’s goal is to find high-quality companies with multiple locations across North America that pay a predictable and growing royalty stream. It has seven different partnerships with companies in industries such as cleaning, education, healthcare, restaurants, real estate, and more. Furthermore, none of its royalty partners contribute more than 50% of its revenue.
Also, just like Freehold and Pizza Pizza, because it’s constantly earning so much cash flow, the stock returns capital to investors every single month.
So, if you’re looking to boost your passive income, Diversified Royalty is one of the top Canadian dividend stocks to consider, especially since it offers an incredible dividend yield of roughly 7.8% today.
