Monthly paying dividend stocks are an excellent means to earn a stable passive income. Given the inflationary environment, passive income can help lower the impact of rising commodity prices. Several companies in Canada offer monthly dividends. However, here are my three top picks.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX: PZA) would be my first pick, given its stable cash flows and high yield. The company has adopted an asset-light business model, operating Pizza Pizza and Pizza 73 brand restaurants through its franchisees. It collects royalties from franchisees based on their sales. So, its financials are less susceptible to the market environment. Besides, the company has been posting strong same-store sales growth this year, which has increased its royalty income.
Supported by solid financials, the company raised its monthly dividend three times last year. It currently pays a monthly dividend of $0.0775/share, with its forward yield at 6.36%. Besides, the Toronto-based restaurant franchise trades at an attractive valuation, with its NTM (next 12 months) price-to-earnings multiple at 16.
Further, Pizza Pizza Royalty is accelerating the construction of its new restaurants across Canada. Also, the company is renovating its old restaurants, which could boost sales and drive its royalty income in the coming quarters. So, I believe PZA would be an excellent buy right now.
Northland Power
Northland Power (TSX: NPI), which is involved in developing and operating clean energy facilities worldwide, is my second pick. It has an economic interest in facilities with a total production capacity of 3.4 gigawatts. It earns substantial revenue through long-term contracts with governments or creditworthy corporations. The weighted average life of these long-term contracts stands at 14 years. So, the company generates stable and predictable cash flows, irrespective of the economic outlook.
Currently, the company pays a monthly dividend of $0.10/share, with its forward yield at 4.76%. Meanwhile, the company continues to expand its footprint across Asia, Europe, and North America through offshore and onshore wind projects. The company expects to increase its production capacity to 6 gigawatts by 2027. Bolstered by these growth initiatives, Northland Power is hopeful of growing its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) at 7 to 10% through 2027 to $1.6 to $1.8 billion. So, I believe NPI stock will be well-positioned to pay dividends at a healthier rate in the coming months.
Whitecap Resources
Another top monthly paying dividend stock I am bullish on is Whitecap Resources (TSX: WCP), which produces and markets oil and natural gas. Oil prices have strengthened this year amid rising geopolitical tensions, falling inventory levels in the United States, and the expectations that the Federal Reserve could cut interest rates in the coming months. Higher oil prices could benefit oil-producing companies, including Whitecap Resources.
Besides, the energy producer plans to invest around $1 billion to $1.2 billion this year to strengthen its production, including drilling 258 wells. The management expects its 2024 production to be between 162,000 and 168,000 barrels of oil equivalent per day, with the midpoint representing a 5% increase from its 2023 production. Also, management expects the growth to continue until 2027 to reach the production of 200,000 barrels of oil equivalent per day.
With Whitecap bringing down its net debt to $1.3 billion, it will now return 75% of free funds flow to shareholders, thus making its future payouts safer. Currently, the company pays a monthly dividend of $0.0608/share, with its forward yield at 8.57%.
