Investing in monthly-paying dividend stocks is one of the convenient ways to earn a stable passive income. However, investors must be careful while investing, as rising interest rates have weakened several companies’ financial positions. Meanwhile, the following three monthly paying dividend stocks could be ideal buys, given their stable cash flows and healthy outlook.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX: PZA) would be an excellent monthly dividend stock to have in your portfolio due to its stable cash flows. The company has adopted a franchising business model while collecting royalty from its franchisees based on their sales. So, its financials are less susceptible to rising commodity prices and wage inflation. Besides, the company has witnessed healthy same-store sales growth of 9.8% this year while driving its adjusted EPS (earnings per share) by 12.4%.
Bouyed by its strong financials, the company has raised its monthly dividend three times, with its forward yield at 6.41%. The company intends to distribute all available cash to its shareholders. However, its payout ratio stands at 97%, as it aims to smoothen out its monthly dividend despite the seasonal variations. Given its initiatives to increase its same-store sales and restaurant expansion plan, the Toronto-based company is well-equipped to boost its financials in the coming quarters. So, I believe Pizza Pizza Royalty would be an excellent buy to drive your passive income.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) has been under pressure over the last 18 months amid rising interest rates and increased debt levels. However, the company has recently strengthened its financial position through asset disposition, financing, and slashing its monthly dividend.
It has sold its stake in Australian Unity Healthcare Property Trust for $110 million while generating $180 million from non-core asset sales. The REIT (Real Estate Investment Trust) has utilized the net proceeds from these initiatives to lower its debt levels. Besides, the company has secured a new term loan of $140 million and extended some of its other debt facilities.
Further, I expect the company to deliver stable cash flows in the coming years, given its defensive healthcare portfolio, long-term contracts with a weighted average lease expiry of around 13.5 years, and inflation-indexed rental income. So, its future payout will be safe. Meanwhile, it currently pays a monthly dividend of $0.03/share, with its forward yield currently at 7.35%.
Whitecap Resources
After witnessing a substantial decline over the last few months, oil prices have rebounded in the previous two weeks amid expectation of rising demand next year. The IEA (International Energy Agency) projects world oil consumption to be at 1.1 million barrels per day in 2024, 130,000 barrels per day higher than its previous forecast. Besides, the median price forecast for Brent crude by five top U.S. banks stands at US$85/barrel, representing an over 6% increase from its current levels.
Higher oil prices could benefit oil-producing companies, including Whitecap Resources (TSX: WCP). Meanwhile, the company expects to strengthen its asset base through a capital investment of $1–$1.2 billion next year. Supported by these investments, the company’s average production could increase by 5% compared to its 2023 guidance. Also, through its disciplined capital budget, the Calgary-based energy company hopes to generate $700 million of free funds flow in 2024.
So, I believe Whitecap Resources is well-positioned to continue rewarding its shareholders with superior dividends. Currently, the company pays a monthly dividend of $0.0608/share, with its forward yield at 8%.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | INVESTMENTS | DIVIDENDS | TOTAL PAYOUTS | FREQUENCY |
| PZA | $14.51 | 758 | $10998.58 | $0.0775 | $58.75 | Monthly |
| NWH.UN | $4.90 | 2244 | $10995.6 | $0.03 | $67.32 | Monthly |
| WCP | $9.11 | 1207 | $10995.77 | $0.0608 | $73.39 | Monthly |
| Total | $199.45 |
Investor takeaway
Given their stable cash flows, the payouts from these three companies are safe. If you invest around $11,000 in each of these three stocks, you can earn a stable passive income of around $200 monthly through dividends. Meanwhile, investors can avoid taxes by making these investments through their TFSA (tax-free savings account).
