One of the best reasons to buy stocks is for the dividend income they can provide. Having the ability to save up some cash and put it to work for you, where it immediately begins to earn you income, is a significant advantage. And right now, with the stock market struggling to rally, earning income from dividend stocks is even more important to investors.
This makes stock selection extremely important for investors. You want to find stocks that are attractive, trading undervalued and offering an appealing dividend yield. However, you also want to find robust stocks you can rely on, particularly if the economic and market environments continue to worsen before they get better.
That’s why my top dividend stock to buy right now, especially if you’re looking to boost your passive income, is Pizza Pizza Royalty (TSX:PZA).
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Pizza Pizza is one of the best dividend stocks to buy in Canada
There are several reasons why Pizza Pizza is one of the best stocks to buy for dividend income, with the first being its makeup as a royalty corp.
Because Pizza Pizza earns a royalty from sales at each of the franchise locations across Canada and doesn’t have to worry about the profitability of individual restaurants, it’s an ideal investment to buy for dividend income.
Another reason why Pizza Pizza is one of the best dividend stocks to buy now is that Pizza Pizza is one of Canada’s most recognized quick-service restaurant chains. This widespread recognition means a consistent customer base and steady revenues.
And those steady revenues are another reason it’s ideal as a dividend payer. With hundreds of franchises under its umbrella across the country, the corporation benefits from the collective success of all its outlets.
In addition, though, it has minimal expenses. So, it simply collects the royalties and pays a small administration expense and then interest and taxes. Therefore, typically, it has a net income margin of roughly 72-78%. Then Pizza Pizza aims to return nearly all of its earnings to investors through its dividend.
So, the fact that it has such strong brand recognition, hundreds of locations across the country, and its own in-house delivery service make it one of the best-known quick-service restaurants in Canada and a top dividend stock to buy for the long haul.
It’s also why Pizza Pizza is relatively resilient to economic downturns. Low-cost, fast-food options, pizza in particular, often remain popular, even during economic downturns. This can mean steadier revenues for Pizza Pizza compared to companies in more volatile sectors but also compared to its restaurant stock competitors.
We already saw the stock weather the pandemic better than any other quick-service restaurant and a lot better than traditional restaurant stocks.
Therefore, Pizza Pizza is an excellent dividend stock to buy and hold for the long haul, especially in the current uncertain market environment.
Pizza Pizza has plenty of growth potential
In addition to Pizza Pizza being one of the best dividend stocks to buy due to its relatively stable revenue and minimal expenses, the stock is also an attractive investment due to the growth potential it has.
Now that the pandemic is behind us, there’s potential for further growth and expansion across Canada, especially in markets where Pizza Pizza and Pizza 73 have a lower presence. Furthermore, Pizza Pizza has also begun to expand into Mexico.
Plus, Pizza Pizza is known to constantly innovate with its menu, catering to a wide range of dietary preferences and needs, from gluten-free options to plant-based toppings. This adaptability can appeal to a broader customer base and continue to help drive sales growth.
So, if you’re looking to boost your income and find a high-quality dividend stock to buy for your portfolio today, Pizza Pizza, with its more than 6.1% dividend yield, is one of the best investments you can make right now.
