Most dividend-paying Canadian companies pay quarterly dividends, although more than 20 stocks pay monthly. Payout frequency matters to some income investors mainly for two reasons: additional funds to add to their disposable incomes and higher returns, because you can reinvest dividends 12 times a year for faster compounding of capital.
Exchange Income Corporation (TSX:EIF) and A&W Revenue Royalties Income Fund (TSX:AW.UN) are the best dividend stocks trading below $50 and paying juicy dividends. You can transform a $50 investment, hypothetically speaking, into monthly income.
Given the average dividend yield of 5.895%, investing $5,090 in each will generate $50 in monthly passive income. Both stocks are eligible investments in a Tax-Free Savings Account (TFSA) if you want tax-free dividends.
Screaming buy
Exchange Income’s record results in the third quarter (Q3) of 2023 in revenues, net earnings, and free cash flow make it a screaming buy in 2024. But without downplaying the quarterly results, the diversified businesses are competitive advantages. They perform well, regardless of market conditions, deliver dependable shareholder returns, and support the hefty yield.
The $2.13 billion company derives revenue from two core business segments: Aviation & Aerospace and Manufacturing. In the three months ending September 30, 2023, revenue and net earnings climbed 17% and 12% year over year to $687.7 million and $49.5 million, respectively. Free cash flow increased 4% to $117.1 million versus Q3 2022.
Its chief executive officer (CEO), Mike Pyle, credits the multiple records in Q3 2023 to strong underlying fundamentals. He said Exchange Income is now sowing the seeds from its recent investments. Management expects them to deliver meaningful long-term growth. Also, EIF’s overall return in five years is pretty decent (115.86%). As of this writing, the share price is $45.62, while the dividend offer is 5.79%.
Continuing strength and success
A&W is a popular brand in the quick-service restaurant and food service industries. A&W Revenue Royalties Income Fund owns the trademarks of well-known brands and collects 3% from sales of the restaurants in the royalty pool. The business thrives, as evidenced by profits and the recent opening of more A&W restaurants (now 1,037 total).
Total revenue and net income of this $466.7 million top-line fund have been trending upward since 2020. For 2023, the estimated revenue and net income figures are $53.6 million and $32.5 million, respectively. At $32 per share, you can partake in the 6% dividend. Moreover, its dividend track record and monthly distribution dates back to 2002.
On December 7, 2023, Susan Senecal, president and CEO of A&W Food Services, said, “We are pleased to be adding 19 new A&W restaurants to the royalty pool at a time of ongoing challenges in the general construction industry. A&W Food Services continues to successfully open new restaurants across Canada, particularly in Ontario and Quebec, which continue to be strategic growth markets for us.”
Canada’s second-largest quick-service hamburger restaurant chain delivered a very strong performance in the third quarter and first three quarters of 2023. Ms. Senecal added that the growth of the royalty pool reflects the continuing strength and success of the A&W brand.
Dividend quality
The dividend-payout frequency is sometimes the primary consideration of income investors. Exchange Income and A&W pay monthly dividends, although shifting to quarterly mode will not affect but maintain the quality and sustainability of their dividends.
