Investing in monthly dividend-paying stocks can help investors create a passive-income stream at a low cost. In addition to its dividend yield, it’s essential to analyze a company’s fundamentals to ensure the payout is sustainable across market cycles.
Here are two quality monthly dividend stocks passive-income investors should own in April.
Canadian Apartment Properties REIT
Valued at $7.9 billion by market cap, Canadian Apartment Properties REIT (TSX: CAR.UN), is the largest publicly traded provider of quality rental housing in the country. It ended 2023 with 64,300 residential apartment suites, townhomes, and manufactured home community sites worth roughly $16.5 billion, located in Canada and Europe.
In the fourth quarter (Q4) of 2023, Canadian Apartment Properties reported operating revenue of $272.19 million, compared to $256.9 million in the year-ago period. Its net operating income increased from $164.5 million to $176 million in this period, indicating a margin of 64.9%. The real estate investment trust (REIT) attributed higher operating revenue to increases in monthly rents on turnovers and renewals.
Canadian Apartment pays shareholders a monthly dividend of $0.121 per share, translating to a payout of 3.1%. Its FFO (funds from operations) per unit stood at $0.602 per share, indicating a payout ratio of just 60.4%, providing the company with the flexibility to target acquisitions and raise dividends further while lowering balance sheet debt.
In 2023, Canadian Apartment Properties sold off non-core properties worth $400 million and reinvested $300 million in new rental properties in high-density markets. In Q4, it acquired two properties with 162 suites in British Columbia for $91.2 million. In the last year, it acquired seven properties with 631 suites for $299.4 million.
Analysts remain bullish on the REIT and expect it to gain 25% in the next 12 months.
Keg Royalties Income Fund
Valued at $250 million by market cap, Keg Royalties Income Fund (TSX: KEG.UN) invests in the Keg Rights Limited Partnership, which owns the trademarks, operating procedures, and other intellectual property used to operate Keg steakhouse restaurants and bars in Canada and the U.S.
The restaurant industry was hampered in recent years due to the COVID-19 pandemic, which resulted in shutdowns. Several full-service restaurants with in-room dining were hit hard and were unable to reopen once lockdown rules were relaxed.
In the last 24 months, the restaurant space showed signs of recovery and is poised to grow by 2.5% annually through 2033, making Keg Royalties Income a top investment choice right now.
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In Q3 of 2023, royalty pool sales reported by 107 Keg restaurants fell 1.5% year over year to $176 million. The decrease was due to the closure of several restaurants for renovation. The management opted to renovate restaurants in Q3 to capitalize on higher guest volumes in Q4. In the first nine months of 2023, royalty pool sales rose by 8.5% to $539.18 million.
The income fund offers shareholders a monthly dividend of $0.0946 per share, indicating a yield of 7.70%. In the last three quarters, distributable cash for Keg Royalties rose to $10.45 million, up from $9.23 million in the year-ago period. It paid shareholders dividends worth $9.66 million, indicating a payout ratio of 92.5%.
