On Wednesday, the Bureau of Labor Statistics stated that the United States consumer prices index rose 3% in June, lower than analysts’ expectations of 3.1%. Moreover, it was the lowest increase since March 2021. Despite the signs of easing inflation, analysts are projecting the Federal Reserve of the United States to increase interest rates one more time. Higher interest rates could deter economic growth, thus hurting equity markets.
Given the uncertain outlook, investors can buy the following two monthly paying dividend stocks to earn a stable passive income.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX: PZA) is a Canadian-based company that operates Pizza Pizza and Pizza 73 brand restaurants. It has adopted a highly franchised business model, with most restaurants operated through franchisees. The company collects royalties from these franchisees based on their sales. So, rising prices and wage inflation will not hurt its financials. Meanwhile, increasing menu prices to compensate for rising prices could boost its royalty income.
In the recently reported first-quarter performance, Pizza Pizza Royalty’s royalty income grew by 15.3% amid same-store sales growth of 13.6% and a net addition of 18 restaurants. Increased consumer visits and average cheque size drove the company’s same-store sales growth. Reopening of non-traditional restaurants, value messaging, and promotional activities drove traffic. Supported by its strong performances over the last few quarters, the company has raised its dividends seven times since April 2020. Meanwhile, the company currently pays a monthly dividend of $0.075/share, translating its dividend yield to 6.06%.
Notably, the uptrend in the company’s financials will continue. The popular pizza chain plans to increase its restaurant count by 3-4% this year. Adding new restaurants and positive same-store sales growth could grow its royalty income, thus allowing it to continue paying dividends at a healthier rate. Besides, it trades at an attractive NTM price-to-sales multiple of 0.8, making it an attractive buy for income-seeking investors.
Northland Power
Second on my list would be Northland Power (TSX: NPI), which develops and operates clean energy infrastructure worldwide. It currently owns or has an interest in power-generating facilities with a total production capacity of 3 gigawatts. The company has been under pressure this year, losing over 26% of its stock value. The increase in operating expenses amid an inflationary environment, weak quarterly performances, and rising interest rates appear to have dragged the company’s stock price down. Amid the pullback, the company trades at 1.6 times its book value, which looks attractive.
Despite the near-term volatility, the renewable energy sector offers excellent growth prospects. McKinsey projects global electricity generation from solar and on- and off-shore wind projects to triple between 2021 and 2030, thus expanding the addressable market for Northland Power.
Meanwhile, the company has a well-diversified 20 gigawatts in the project pipeline. Of these projects, 60% are off-shore, 25% solar, 5% on-shore, and 10% others. Besides, 40% of these projects are in Europe, 30% in North America, 25% in Asia, and 5% in Latin America. These diversified projects could boost the company’s financials in the coming years. Besides, the company is evaluating its asset portfolio and divesting of low profitability assets, which could strengthen its financial position.
Notably, Northland Power has been paying dividends uninterruptedly since 1998. It currently pays a monthly dividend of $0.10/share, with its yield at 4.48%. Considering all these factors, I believe Northland Power would be an ideal buy to boost your passive income.
