3 Top Canadian Royalty Stocks With Dividend Yields Averaging 5%

Canadian royalty stocks can provide a lucrative income for investors. Here are three great options to consider buying right now.

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One of the primary goals of investors everywhere is to establish a well-diversified portfolio of stocks that pay out handsome dividends. One class of dividend stocks often overlooked is Canadian royalty stocks, which can provide a lucrative income.

Here’s a look at some of the best Canadian royalty stocks to consider for your portfolio.

Hungry for income?

Pizza Pizza Royalty Corp (TSX:PZA) is the name that most Canadians will recognize. The company is the name behind some of the largest and most well-known food service names in the country: Pizza 73 and Pizza Pizza.

Collectively, the company has nearly 750 franchise restaurants located across the country. In the most recent quarterly update, Pizza Pizza Royalty saw same-store sales increase by 9.8% over the first three quarters of the year. That’s an important point to note given the inflation we’ve seen over the past year.

And despite that volatility, Pizza Pizza Royalty managed to post strong growth numbers. Both royalty pool income (11.6%) and adjusted earnings per share (12.2%) saw impressive increases over that same period.

Turning to income, there’s a clear reason why Pizza Pizza Royalty is one of the top Canadian royalty stocks to buy. As of the time of writing, Pizza Pizza Royalty boasts an appetizing 6.42% yield paid out monthly. This handily makes it one of the better-paying options on the market.

Keep in mind that Pizza Pizza Royalty’s yield includes a recent bump to that dividend. Specifically, that recent bump was the third increase this year! Between that impressive (and growing) income potential and reliable business model, there’s plenty to love. Pizza Pizza Royalty is also one of a handful of companies that has stayed in the black much of this year.

As of the time of writing, Pizza Pizza is up nearly 6% year to date.

Energize your income stream

Another one of the top Canadian royalty stocks to consider is Freehold Royalties (TSX:FRU). For those unfamiliar with the company, Calgary-based Freehold works in the oil and gas sector, but it’s not an oil producer.

Instead, Freehold generates royalties from its massive portfolio of gas and oil properties. Those properties, which include over 18,00 wells across the U.S. and Canada, encompass over 380 providers.

Suffice it to say, that makes Freehold a very diversified operation and one of the great Canadian royalty stocks to consider.

Turning to income, Freehold provides investors with an insane 8.23% yield distributed on a monthly cadence. For investors with $40,000 to allocate to Freehold (as part of a larger, well-diversified portfolio), that translates into a monthly income of over $270.

Oh, and like much of the market, Freehold is trading down this year. The company currently trades at a 16.7% discount year to date, making it a superb discounted stock to grab right now.

This streamer is a royalty-producing gem

Another lesser-known of the Canadian royalty stocks to consider is Wheaton Precious Metals (TSX:WPM). Wheaton is a precious metals streamer, which is a subtle yet important difference from its traditional mining peers.

Streamers provide upfront capital to traditional miners, who then set up operations and begin production. In exchange for that upfront capital, streamers are permitted to purchase a portion of the metals produced at a considerable discount.

The streamer can then sell on those metals at the market rate or choose to wait until market conditions improve.

More importantly, the lower-risk model allows the streamer to move on to other mining opportunities. This leaves the day-to-day operations with the traditional miner, yet still allows the company to expand quickly and pay a generous dividend.

In the case of Wheaton, that dividend amounts to a respectable 1.25%. That yield is based on the performance of the preceding quarters. It’s also worth noting that investors flock to precious metals during times of market volatility.

As a result, the stock is up over 20% year to date, while gold is up US$200 per ounce this year.

Final thoughts

No stock is without some risk, including the trio of Canadian royalty stocks mentioned above. Fortunately, each of the stocks noted can offer growth and defensive appeal in addition to a juicy dividend.

In my opinion, one or all of these stocks warrant a small position in any well-diversified portfolio.

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 Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.

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