The Canadian stock market offers several high-quality publicly traded businesses producing strong and stable cash flows. Some of these companies share a portion of profits with investors through shareholder dividends. Of these, royalty stocks offer investors excellent investment opportunities with high-yielding dividends and relatively lower-risk profiles.
Today, I will discuss three such stocks you can add to your portfolio to lock in high-yielding dividend payouts.
Freehold Royalties
Freehold Royalties Ltd. (TSX:FRU) is a $2 billion market capitalization oil and gas company that engages in producing oil and natural gas. Unlike many other energy companies, Freehold Royalties does not take on any risks to produce or develop any energy products. Instead, it collects royalties on what other energy companies produce.
Due to its low-risk royalty business model, Freehold does not have operating costs, allowing it to continue generating steady cash flows despite inflation. Since it also does not have any exploration costs, it can avoid any exploration failures negatively impacting its revenue. As of this writing, Freehold Royalties stock trades for $13.44 per share, boasting a juicy 8.04% dividend yield.
While not without its risks, Freehold Royalties stock offers relatively safe exposure to the traditional energy industry.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) is a $1.5 billion market capitalization owner and operator of healthcare properties diversified worldwide. The Real Estate Investment Trust (REIT) has a portfolio of properties operating in the healthcare sector, including medical office buildings, hospitals, and rehab centers.
Most of its tenants are backed by government funding, offering stable revenue. Combined with a weighted average lease expiry of 14 years, NorthWest Healthcare Properties REIT is a solid income-generating asset.
As of this writing, NWH.UN trades for $6.28 per share. At current levels, it boasts a juicy 13.12% dividend yield. With an aging population increasing the demand for healthcare services and government-backed tenants on long-term leases, NWH.UN can generate stable cash flows to comfortably fund its monthly distributions.
Its defensive setup, strong distribution profile, and solid growth history make it an excellent stock to consider for your self-directed portfolio.
Pizza Pizza Royalty
Pizza Pizza Royalty Corp. (TSX:PZA) is a $364.6 million market capitalization franchised pizza quick-service restaurant headquartered in Toronto. PZA owns and franchises quick-service restaurants under the Pizza Pizza and Pizza73 brands, and it is one of the biggest names in the pizza space in Canada, making it a mature business in the segment.
As of this writing, PZA stock trades for $14.81 per share, offering shareholder dividends at a juicy 6.08% dividend yield. Its dividends are backed by stable cash flows from its low-risk royalty business model. As consumers continue relying on less expensive options for food, companies like Pizza Pizza can continue generating healthy cash flows.
Foolish takeaway
Corporations with ownership rights to assets or resources offering a share of revenue generated from them to shareholders are royalty stocks. By distributing portions of sales income, these royalty trusts generate steady, passive income for investors.
Freehold Royalties stock, NorthWest Healthcare Properties REIT, and Pizza Pizza Royalty stock are three royalty stocks that can be excellent additions to your long-term self-directed investment portfolio. While I like all three royalty stocks, I think NorthWest Healthcare Properties REIT is the most compelling.
