Yield-hungry investors favour dividend stocks with above-average yields for larger payouts. However, some dividend earners prefer immediate monthly income instead of quarterly.
Boston Pizza Royalties Income Fund (TSX: BPF.UN) and Nexus Industrial (TSX: NXR.UN) offer the best of both worlds. Besides the 7.7% dividend yield, the payout frequency is monthly. Your dividend income is tax-free if you hold the dividend stocks in your Tax-Free Savings Account (TFSA).
Assuming you invest $10,000 ($5,000 each), you transform the capital into $64.17 monthly. Also, if you’re a long-term investor, any invested capital will compound faster and double in 9.35 years through dividend reinvesting (12 times a year).
Top casual dining brand
Boston Pizza is the number one casual dining brand in Canada. The $357.68 million income fund owns the Boston Pizza International (BPI) trademarks and collects royalties from the restaurants in the royalty pool. But are the dividends safe at $16.62 per share (+14.63% year to date)?
The business has been around for nearly six decades, and the stock hasn’t missed paying monthly dividends since 2002. In the first half of 2023, total revenue and royalty income increased by 14.9% and 15% to $24.33 million and $18.31 million compared to the same period in 2022. The net and comprehensive income climbed 32,6% year over year to $19.45 million.
Notably, franchise sales of Boston Pizza restaurants in the Royalty Pool increased 15.1% to $457.9 million from a year ago. In the second quarter (Q2) of 2023, franchise sales and same-restaurant sales (SRS) rose 6.6% and 6.5% year over year. The number of restaurants is 377 compared to 383 in 2022.
Jordan Holm, BPI’s president, said, “We are pleased that positive sales momentum continued through the second quarter of 2023 despite the current macroeconomic conditions and industry challenges. As economic uncertainty and inflationary pressures persist in 2023, we will continue to work diligently to support our franchisees.”
Despite the economically uncertain times, Boston Pizza restaurants continue to generate solid franchise sales. However, investors should be aware of seasonal fluctuations inherent in the full-service restaurant industry. Franchise sales are strongest in the second and third quarters versus the first and fourth quarters.
Rock-steady distribution
Nexus Industrial owns 112 commercial properties (industrial, retail, and office) across Canada. The goal of this $744.4 million real estate investment (REIT) is to achieve an industrial weighting of over 90% by net operating income (NOI) in Q3 2023 (currently at 85%).
A predominantly industrial property portfolio with lower capital intensity should deliver stable, long-term cash flows. The lease contracts have built-in annual rent escalations, while the weighted average lease term of the industrial leases is 6.6 years.
In the first half of 2023, property revenues and NOI rose 15.3% and 16.2% year over year to $75.9 million and $53.4 million. According to its chief executive officer Kelly Hanczyk, the high grading of Nexus’s portfolio is ongoing. Likewise, the high-yielding development projects are progressing well.
At $8.24 per share, the REIT trades at a discount (-11.04%). Nevertheless, the generous monthly distribution of this industrial vehicle in the real estate market is rock steady.
Cash cows
Boston Pizza and Nexus Industrial are cash cows providing monthly income streams. Investors can own both or choose between the restaurant and real estate sectors.
