Many investors love to buy dividend stocks due to the attractive returns they can offer. Not only do high-quality dividend stocks offer an attractive yield, but over the long haul, they can offer significant capital gains potential as well.
And when you buy a stock that pays cash every month rather than just once a quarter, you have the opportunity to put that cash back to work even faster, which can help you to compound your capital at an even faster pace.
When it comes to buying dividend stocks, though, often investors are drawn to the highest-yielding companies due to the significant passive income they can provide.
However, as important as it is to lock in as high a yield as possible, it’s even more important to ensure that the stocks you buy have sustainable dividends in order to avoid having your dividends cut down the line.
So, with that in mind, if you’re looking for high-yield dividend stocks to buy now, here are three of the best in Canada that return you cash every single month.
Royalty stocks make excellent dividend stocks
Many of the best dividend stocks on the TSX are royalty stocks, companies that predominantly receive a royalty for the services they offer without having to spend much cash themselves to generate that revenue.
For example, two of the best high-yield dividend stocks to buy now are Pizza Pizza Royalty (TSX: PZA) and Freehold Royalties (TSX: FRU).
While both stocks operate in completely different sectors and couldn’t be more different in that regard, the fact that both are royalty companies which constantly earn significant cash flow gives them a lot of similarities.
In Pizza Pizza’s case, the stock receives a royalty from all the sales across its hundreds of locations nationwide. Pizza Pizza doesn’t have to worry about the profitability of individual locations. All that matters to the stock is that the aggregate level of sales across the country is consistently increasing.
This makes it a much less risky business as revenues don’t fluctuate nearly as much as profitability can. Furthermore, the stock can pay out essentially all the earnings it generates, resulting in an attractive dividend yield of 6.5%.
When it comes to Freehold, the energy stock earns a royalty from other energy companies using its land to produce oil and gas.
It’s still somewhat exposed to the fluctuations in the price of energy, but because it doesn’t have to spend any capex to generate revenue like energy producers do, it’s a lower-risk business allowing it to consistently earn millions in cash flow.
In fact, in 2023, Freehold is estimated to have earned roughly $239 million of free cash flow. Meanwhile, it only paid out less than $165 million in dividends. And all that excess cash can be used to invest in buying more land and expanding its operations.
So, on top of the 7.6% dividend yield that Freehold offers, it also has considerable long-term growth potential.
A top Canadian real estate stock
In addition to royalty companies, real estate stocks are also some of the best dividend stocks you can buy, especially if you’re looking for a stock that returns cash monthly.
And while there are a handful of high-quality, high-yield real estate stocks to choose from, there’s no question that CT REIT (TSX: CRT.UN) is one of the best.
CT REIT has a unique relationship with Canadian Tire, the massive, well-known retailer. Not only is Canadian Tire the majority owner of CT REIT, but it’s also its largest tenant, accounting for roughly 90% of its revenue, making CT REIT one of the most reliable investments you can buy in the real estate sector.
Since going public roughly a decade ago, CT REIT has consistently grown both its revenue and distribution every single year. And with CT REIT trading off its 52-week high, the Canadian dividend aristocrat currently offers an attractive yield of roughly 6.4%.
So if you’re looking for a high-yield dividend stock that returns cash each month and you can buy and hold with confidence, CT REIT is undoubtedly one of the top picks on the TSX.
