Last week, Statistics Canada announced that Canada’s inflation in August rose to 4% — a 0.7% increase compared to July. The increase in gasoline largely contributed to the rise in inflation numbers. Meanwhile, grocery and shelter prices remained elevated, with a year-over-year increase of 6.9% and 6%, respectively. With inflation eating into your pockets, investors should look to buy high-yielding and monthly-paying dividend stocks to earn a stable passive income, which could lower the impact of rising prices. Meanwhile, here are my three top picks.
Pizza Pizza Royalty
Despite rising prices and wage inflation impacting the profitability of restaurants, I have selected Pizza Pizza Royalty (TSX: PZA) as my first pick due to its highly franchised business model. The company, which owns Pizza Pizza and Pizza 73 brands, collects royalties from its franchises based on their sales. So, with the increase in same-store sales and the net addition of new restaurants, the company’s royalty pool income has increased over the last few quarters. Supported by these strong financials, the company has raised its monthly dividend seven times since April 2020, with its forward yield at 6.6%.
The company’s product innovation, value messaging, promotional activities, and renovation of old restaurants could continue to drive its same-store sales. Also, the company is expanding its restaurant network and hopes to increase its restaurant count by 3-4% this year. Amid these growth initiatives, I believe PZA’s future payouts to be safe. Also, the restaurant company trades at 1.5 times its book value and 13.7 times NTM (next 12-month) price to earnings, making it an attractive buy at these levels.
Northland Power
Northland Power (TSX: NPI) operates well-diversified energy-producing facilities with a total production capacity of three gigawatts. The company earns substantial revenue through long-term contracts (power-purchase agreements) with governments and creditworthy corporate counterparties. The weighted average life of its power-purchase agreements stands at over 14 years, thus delivering stability to its future cash flows.
The growing transition towards renewable or clean energy has created a long-term growth potential for Northland Power. Meanwhile, the company is targeting Europe and Asia to expand its footprint and expects to increase its portfolio to 6 gigawatts by 2027. Amid these growth initiatives, the company’s management hopes to grow its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) at an annualized rate of 7-10% through 2027. So, I believe its future payouts to be safe.
Currently, the company pays a monthly dividend of $0.10/share, with its forward yield at 5.61%. It also trades at an attractive NTM price-to-earnings multiple of 17.3, making it an attractive buy.
Whitecap Resources
Another top monthly-paying dividend stock is Whitecap Resources (TSX: WCP), an oil and natural gas company. Oil prices have increased over the last few weeks amid supply concerns and rising demand, especially from China. Further, analysts predict oil prices to remain elevated in the near to medium term, which could benefit oil-producing companies, including Whitecap Resources.
The company expects to invest around $900-$950 million this year, supporting its production growth. For 2023, the company’s management expects its production to be between 157,000 and 159,000 barrels of oil equivalent per day, with the midpoint representing a 9% year-over-year growth. The company expects an organic annual growth of 5% for the next five years, supporting its financial growth.
Meanwhile, the company has announced a 26% increase in monthly dividend from November to $0.0608/share, translating into an annualized dividend of $0.73/share and a forward yield of 6.63%. Considering all these factors, I believe Whitecap Resources would be an ideal buy for income-seeking investors.
