Your portfolio will not be complete without quality dividend stocks. Amid their regular payouts, these companies are less susceptible to market volatility and help investors earn a stable passive income. Meanwhile, the following three stocks pay dividends at healthier rates and trade at attractive valuations.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX: PZA) has adopted an asset-light business model, operating its restaurants through franchisees. It collects royalty from its franchisees based on their sales. So, its financials are less susceptible to broader market conditions, thus generating stable cash flows. Its same-store sales have also been strong in the first three quarters, rising 9.8%. New product launches and promotional activities drove its same-store sales.
Amid solid performances, the company’s royalty income grew by 11.6%, thus allowing it to raise its monthly dividend three times last year. Currently, the company pays a dividend of $0.0775/share monthly, with its forward yield at 6.32%. It intends to pay all available cash to maximize shareholders’ returns. However, its payout ratio currently stands at 97% to smoothen out its payouts amid seasonal variations that are inherent to the restaurant industry.
Further, the company’s store expansion and restaurant renovation plans could boost its financials in the coming quarters. So, I believe its future payouts will be safe. Its forward NTM (next 12-month) price-to-earnings multiple of 16.2 makes it an attractive buy.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN), which owns and operates 229 healthcare properties across seven countries, is my second pick. The company has been under pressure over the last 24 months, losing around 60% of its stock value compared to its 2022 highs. Rising interest rates and increased debt levels weighed on its financials, thus dragging its stock price down.
Meanwhile, the company has taken several initiatives, such as asset disposition, financing, and slashing its monthly dividend, to strengthen its financial position. It has generated $110 million from the sale of its stake in Australian Unity Healthcare Property Trust and has also sold non-core assets worth $180 million. The company used the net proceeds from these sales to lower its debt levels. It has also secured a $140 million new term loan, strengthening its financial position.
Notably, the underlying business of the healthcare REIT (real estate investment trust) remains strong, given its highly defensive healthcare portfolio. The company’s long-term contracts and inflation-indexed rent agreements stabilize its financials. Also, despite dividend cuts, its forward yield still stands at an attractive 7.1, making it an attractive buy.
TC Energy
TC Energy (TSX: TRP) has been under pressure over the last two years, losing over 20% of its stock value compared to its 2022 highs. The impact of the spillage at its Keystone pipeline facility and rising interest rates on its financials have dragged its stock price down. Amid the weakness, the company trades at an attractive NTM price-to-earnings multiple of 13.3, making it an attractive buy.
The company earns around 95% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from long-term contracts and regulated assets, thus delivering stability to its cash flows. It also strengthened its financial position by selling its stake in Columbia Gas and Columbia Gulf Transmission for $5.3 billion. It is also advancing with its other asset sales, which could generate around $3 billion.
Further, the Calgary-based midstream company focuses on making capital investments of $8-$8.5 billion in 2024 and $6-$7 billion yearly until 2026. Amid these investments, the company’s management expects its adjusted EBITDA to grow at an annualized rate of 7% through 2026, making its future payouts safer. Meanwhile, the company currently pays a quarterly dividend of $0.93/share, with its forward yield at 7.16%.
