Quality dividend stocks with a monthly payout can help investors generate a stable recurring income stream. Ideally, you would want these companies to increase dividends yearly while benefitting from long-term capital gains.
Here are four top TSX stocks that will provide you with a monthly income in 2023.
Exchange Income stock
Valued at a market cap of $2.3 billion, Exchange Income (TSX:EIF) has already created massive wealth for long-term investors. The TSX stock is up close to 300% in the last 10 years. Despite these outsized returns, it currently offers shareholders a dividend yield of 4.8%.
Exchange Income’s operating segments are strategic business units that include Aviation Services and Aerospace & Manufacturing. Due to its diversified cash flows, Exchange Income has raised dividends 16 times, distributing over $750 million to shareholders.
Priced at 14.4 times forward earnings, EIF stock is trading at a cheap valuation as adjusted earnings are forecast to grow by 11.5% annually in the next five years.
Killam Apartment REIT
One of Canada’s largest residential real estate investment trusts (REITs), Killam Apartment (TSX:KMP.UN) also provides investors exposure to a different asset class, lowering overall portfolio risk.
In the first quarter (Q1) of 2023, Killam Apartment stated its funds flow from operations, or FFO, grew by 4.2% on a per unit basis. It also initiated a capital-recycling program completing $42.8 million of dispositions, generating over $27 million in net cash proceeds.
Killam Apartment has a capital-recycling goal of $100 million in 2023, which should allow it to pursue growth opportunities and lower balance sheet debt.
Killam pays unitholders a monthly dividend of $0.058 per share, translating to a yield of almost 4%. The TSX stock is currently priced at a discount of 20%, given consensus price target estimates.
Freehold Royalties stock
A company that acquires and manages royalty interest in crude oil, potash, natural gas liquids, and natural gas, Freehold Royalties (TSX:FRU) offers you a tasty dividend yield of 7.6%. Despite lower commodity prices in 2023, strong drilling activity in the U.S. and Canada should benefit Freehold Royalties. In fact, Freehold’s Clearwater assets averaged 450 boe/d, an increase of 25% year over year.
The company claimed that despite modest investment levels in Canada, substantial production numbers have been achieved in the country in the last three years. In addition, Freehold continues to experience robust leasing activity across royalty properties, allowing it to pay shareholders a monthly dividend of $0.09 per share.
In Q1 of 2023, its fund flow and production volumes were in line with estimates. It also expects funds flow to range between $250 million and $280 million in 2023, indicating a payout ratio of 60%, which is sustainable if the prices of West Texas Intermediate range around US$80/bbl.
Pizza Pizza Royalty stock
The final monthly dividend stock on my list is Pizza Pizza Royalty (TSX:PZA), which currently offers a dividend yield of 6%. A small-cap stock valued at $455 million, Pizza Pizza Royalty increased same-store sales by 13.6% and royalty pool sales by 16% in Q1 of 2023.
Its adjusted earnings also surged by 16%, as it opened seven new restaurants in the quarter, while the royalty pool of restaurants was up 16 in 2023.
Down 21% from all-time highs, PZA stock is priced at a discount of 10% to consensus price target estimates.
