This 7.4% Dividend Stock Is My Top Pick for its Monthly Income

I’m targeting the Keg Royalties Income Fund (TSX:KEG.UN) as a top monthly dividend stock, as restaurants continue to rebound post-pandemic.

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Canadian economists greeted investors with some troubling news to kick off the third week of August. Inflation is set to move upwards after nearly a year straight of monthly declines. That means that any interest rate relief that some Canadians may have been hoping for is almost certainly not forthcoming. Moreover, there are deeper concerns that Canada may be dragged into a global economic slowdown. Today, I want to target a high-yield dividend stock that will pay you monthly in this choppy environment. Let’s jump in.

How has this monthly dividend stock performed over the past year?

Keg Royalties Income Fund (TSX:KEG.UN) is a Vancouver-based, unincorporated, open-ended, limited-purpose trust. Shares of this dividend stock have dipped 1.5% month over month as of close on Monday, August 14. Meanwhile, the Keg Royalties stock is still up marginally so far in 2023. Investors can see more of the dividend stock’s recent performance with the interactive price chart below.

Here’s why investors should get in on the restaurant space in 2023

The restaurant industry passed through an extremely challenging period over the course of the COVID-19 pandemic. Full-service restaurants that offer in-room dining and a more intimate person-to-person experience were particularly devastated by the new rules introduced to fight pandemic spread. Unfortunately, many restaurants were unable to survive the economic hardships brought about by the pandemic.

In 2022, the restaurant space started to show signs of a promising recovery. Future Market Insights recently valued the global full-service restaurant market at US$1.51 trillion in 2023. The same report projects that this market will reach a valuation of US$1.93 trillion by 2033. That would represent a solid compound annual growth rate (CAGR) of 2.5% over the forecast period.

Should investors be happy with the Keg’s recent results?

Most Canadians are undoubtedly familiar with The Keg Steakhouse + Bar. This Canadian chain has consistently attracted heavy foot traffic.

The Keg Royalties Income Fund released its second-quarter (Q2) fiscal 2023 earnings on August 9. Royalty Pool sales declined 2.9% year over year to $171 million. However, royalty pool sales were still up 14% over the previous year in the first six months of fiscal 2023. Same-store sales were down 2.3% in Q2, but delivered 14% growth in the year-to-date period. The Keg restaurants benefited from more operating weeks compared to the previous year, which gave a boost to year-to-date numbers.

Management remained “pleased” with the company’s Q2 report, despite a decline in foot traffic and overall sales. President Nick Dean stated that Q2 2022 numbers were positively impacted by the post-pandemic surge of guests.

Why I’m buying this monthly dividend stock today

Shares of this dividend stock are trading in favourable value territory compared to its industry peers at the time of this writing. On August 11, the Keg Royalties Income Fund announced an August 2023 cash distribution of $0.095 per share. That represents a very tasty 7.4% yield. I’m looking to gobble up this undervalued monthly dividend stock in the middle of August.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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