Last month, Statistics Canada announced that Canada’s year-over-year inflation rose 2.9% in January, lower than 3.4% in December. It is the first time inflation has declined to below 3% since last June. Despite the signs of inflation easing, it remains higher than the Central Bank’s guidance of 2%. With higher prices eating into your income, investors can invest in monthly-paying dividend stocks to earn a stable passive income that can reduce their burden.
Meanwhile, here are my three top picks.
Pizza Pizza Royalty
Pizza Pizza Royalty (TSX: PZA) owns and operates Pizza Pizza and Pizza 73 brand restaurants. It has adopted a highly franchised business model and collects royalties from its franchises based on their sales. So, its financials are less susceptible to inflation, thus generating stable and predictable cash flows. Although the company would like to pay all the available cash to its shareholders, its payout ratio stands at 97% amid its efforts to smoothen its dividend payouts despite the seasonal variations.
Meanwhile, the Toronto-based restaurant company added 45 new restaurants to its royalty pool and removed 14 restaurants that closed their operations. So, it currently has 774 restaurants in its royalty pool compared to 743 restaurants last year. New product launches, marketing initiatives, and renovation of old restaurants could boost its same-store sales growth in the coming quarters. So, higher same-store sales and increased restaurant count in its royalty pool could boost its royalty income, making its dividend payouts safer.
PZA currently pays a monthly dividend of $0.0775/share, with its forward yield at 6.52%. Meanwhile, the company trades at 15.7 times its projected earnings for the next four quarters, making it an attractive buy.
Whitecap Resources
Oil prices have increased by around 10% this year amid supply concerns due to the ongoing geopolitical tensions and voluntary production cuts by OPEC (Organization of the Petroleum Exporting Countries) and its allies. Higher oil prices could benefit oil-producing companies like Whitecap Resources (TSX: WCP).
The Calgary-based oil and natural gas producer strengthened its production capacity by drilling 215 wells last year. It also expects to make a capital investment of $900 million to $1.1 billion this year. Amid these initiatives, the company’s management expects its average production in 2024 to be 165,000–170,000 barrels of oil equivalent per day. The midpoint of the guidance points to a 6.7% increase from the previous year.
Elevated oil prices and increased production could boost its financials. Meanwhile, management expects to generate 1.6 billion in fund flows this year, resulting in a free funds flow of $600 million after capital investments. These free fund flows are sufficient to cover its annual dividend obligations of $435 million, making its dividends safer. With a monthly dividend of $0.0608/share, it offers a forward yield of 7.59%, making it an attractive buy.
Savaria
Another top monthly-paying dividend stock to have in your portfolio would be Savaria (TSX: SIS), which offers accessibility solutions to the physically challenged. The growth in the aging population, rising income levels, and increased government investment in healthcare infrastructure have expanded the company’s addressable market. Given Savaria’s expanded product offerings, global production facilities, and extensive dealer network, it can benefit from market expansion.
Further, the growing synergies between itself and Handicare and higher product prices could boost its financials in the coming quarters. Amid these growth initiatives, Savaria’s management is confident of achieving $1 billion in revenue in 2025. So, its growth prospects look healthy.
Meanwhile, Savaria currently pays a monthly dividend of $0.0433/share, with its forward yield currently at 3.12%. Given its healthy outlook, I believe the company’s dividend payouts are safer, making it an excellent buy.
