Owning dividend stocks, especially ones that offer a high yield, offers investors significant advantages. For example, in addition to the capital gains potential that these stocks offer, they are also constantly returning cash to investors. Dividends help lower the risk of the investment and allow investors to reinvest that cash how they see fit. Astute investors reinvest that cash to take advantage of the power of compounding.
Most dividend stocks return cash to investors every quarter. However, there are some stocks, such as Pizza Pizza Royalty (TSX:PZA), that return cash to investors every single month. This gives investors even more opportunity to turn around and reinvest that cash immediately. Dividend reinvesting is why monthly dividend stocks can be so popular.
So if you’re looking for a monthly dividend stock to help you take advantage of compound interest, or are just looking for a high-quality stock to buy now and hold for years, here’s why Pizza Pizza and its 6.2% dividend yield is one of the best Canadian stocks to buy today.
Pizza Pizza Royalty is an ideal passive income generator
There are several reasons why Pizza Pizza is one of the top dividend stocks in Canada to buy and hold in your portfolio for years as a passive income generator.
First off, Pizza Pizza is a well-known brand, particularly if you’re looking for a quick-service restaurant that offers affordable food options.
Plus, in addition to its business operations, because the company is a royalty stock, its financials are super straightforward. Pizza Pizza simply aims to grow the aggregate sales from its pool of restaurants all across Canada.
Therefore, because it has a straightforward business model and a well-known brand, it’s constantly generating passive income for investors each month. Notably, the stock aims to pay out essentially all of its income. Because it doesn’t experience much volatility with the royalties it’s earning, the dividend is not only safe and resilient, it’s constantly being increased as Pizza Pizza’s sales grow.
In fact, Pizza Pizza just increased its dividend again this month, which is now the seventh dividend increase since the restaurant stock trimmed its dividend at the start of the pandemic.
It’s also worth noting that when it did trim the dividend at the start of the pandemic, it only cut the dividend by 30%, much less than many other companies, especially its competitors in the restaurant space.
It’s also worth noting that Pizza Pizza now offers a higher dividend yield than it did going into the pandemic, showing how well it weathered the storm and how fast it has been able to recover.
Is Pizza Pizza a top dividend stock to buy now?
Many expect a recession to materialize soon. And many restaurant stocks have been declining as a result of the risk and uncertainty in this environment. Nonetheless, Pizza Pizza still looks like one of the top dividend stocks to buy now and hold for years, especially while it pulls back from its highs.
Since Pizza Pizza is a well-known brand, has its own in-house delivery service, and offers consumers affordable meal options, it’s much better positioned to weather a recession than its restaurant industry competitors.
That doesn’t mean it won’t be impacted by a recession, but it could certainly see much smaller impacts on its business, especially after its impressive performance through the pandemic.
Plus, in addition to the dividend and resiliency it offers today, over the long haul, Pizza Pizza stock continues to offer plenty of growth potential, especially as it continues to explore ways to expand its store count in Mexico.
The dividend stock began opening stores in Mexico in April of this year and eventually has a target of opening 10 new locations each year.
Therefore, considering that Pizza Pizza offers an attractive yield, has a highly safe dividend, returns cash every month and offers plenty of long-term growth potential, there’s no question it’s one of the top dividend stocks that Canadian investors can buy today.
