Investors looking to boost their portfolios’ passive-income streams may find great high-yield bargains on some of the best dividend stocks in Canada today. Even if one has limited free funds to invest in June 2024, Pizza Pizza Royalty (TSX: PZA) stock, Alaris Royalty Partners Income Trust (TSX: AD.UN) units, and Freehold Royalties (TSX: FRU) could transform a $500 investment into multiple streams of dependable high-yield dividend cash flow. Here’s how.
Pizza Pizza Royalty: A tasty slice of royalty revenue
Pizza Pizza Royalty is a $440 million royalty collector that licenses its quick-service restaurant brands and business model to a growing number of Pizza Pizza and Pizza 73 franchisees. The corporation boasts a top-tier operating margin of 98.5% and converts about 78% of its revenue into distributable free cash flow, which it shares generously with investors through monthly regular dividends.
Pizza Pizza Royalty’s well-covered monthly dividends of $0.077 per share yield a juicy 7% annually — earning the stock among the best dividend stocks to buy in Canada today.
The royalty monger’s royalty revenue has been growing steadily after the pandemic, and its receipts during the past 12 months exceeded pre-pandemic annual revenue by 14%. Most of the company’s royalties accrue to investors today because Pizza Pizza Royalty has significantly reduced its debt leverage in its capital structure over the past half-decade simply by avoiding borrowing. Debt comprises 13.5% of the company’s total capital.
Why should you buy the royalty stock? Pizza Pizza Royalty stock’s 10% decline year to date lowered its historical P/E ratio to a more affordable level of 13.5, which compares favourably against an industry average of 26.4. New investors in the royalty “fund” can find cheaper entry points today.
Most noteworthy, the high inflation rates of yesteryears were a tailwind for food stocks, especially restaurant royalty collectors. An increase in menu prices raised their royalty collections per “plate.” Given that prices may be sticky downwards, some food prices may hold at inflation-propelled levels for longer, earning the royalty corporation increased cash flows.
Alaris Equity Partners Income Trust: Alternative financing with high yields
Alaris Equity Partners Income Trust is a $700 million Canadian dividend stock that provides alternative financing to private companies. It receives stable and highly predictable distributions from funded entities based on their gross margins or same-store sales performance.
New Alaris Equity Partners stock investors may receive $0.33 per unit in quarterly dividends, yielding 8.7% annually. The distribution comprises under 30% of the trust’s annual earnings and 66% of the distributable cash flow generated last quarter. Earnings and cash flow well cover the payout.
Alaris Equity Partners Income Trust is one of the best dividend stocks in Canada today. Not only does it pay a juicy, well-covered distribution that could double your capital in just over eight years (estimated using the Rule of 72), but units trade cheaply today. At a recent stock price of $15.69, the reliable dividend stock trades at a significant discount to its most recent book value of $21.66 at the end of the first quarter of this year.
Freehold Royalties: High-yield monthly income from oil and gas
Freehold Royalties is a $2.1 billion Canadian dividend stock that pays its investors recurring monthly income yielding 7.6% annually The monthly dividend stock acquires and manages oil and gas royalties in Western Canada and the United States. In a recent quarterly earnings report, the company noted double-digit increases in drilling activity in its portfolio, which promises potential income growth even as natural gas prices soften.
Meanwhile, Freehold Royalties remains one of Canada’s best monthly dividend stocks to buy as it paid out 75% of its funds from operations in dividends during the first quarter of this year. The payout seems well covered, and dividend safety will significantly improve if gas prices turn around.
The company continues to invest in new royalty properties while maintaining a healthy balance sheet with a long-term debt-to-capital ratio of 19.6%. Leverage isn’t a near-term concern for investors who may munch on Freehold Royalties’s monthly payouts on their way to potential financial freedom.
