9.4% Dividend Yield! Why I’m Buying This Stock and Holding it for All Time

If you’re tired of coming across the same dividend stocks over and again, here’s one analysts love that provides a high yield and a cheap share price.

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Sometimes, it can feel like we’re looking at the same dividend stocks over and over again — especially when looking at the TSX today. Yet, there are diamonds in the rough — ones that provide attractive dividend yields and are well-regarded by analysts for their ability to generate consistent returns for investors. With that in mind, today, we’re going to focus, in particular, on one dividend stock yielding 9.4%: Diversified Royalty (TSX:DIV).

Why we love it

DIV stock is generating quite a buzz among analysts and investors and for good reasons. Imagine a company that doesn’t just bet on one horse but has a whole stable of them—each contributing to a steady stream of income. That’s exactly what DIV does: it collects royalties from a variety of businesses across different sectors. This diversified approach means they’re not overly dependent on any single revenue source, which is a smart way to hedge against economic ups and downs. 

One of the most appealing aspects of DIV is its impressive dividend yield, which hovers around a juicy 9.4%. For income-focused investors, this is like finding a golden egg in a nest of regular ones. The high yield means regular, robust payouts, making it a favourite among those looking to bolster their income without having to sell their shares. 

But there’s more to the story than just dividends. Analysts are excited about DIV’s growth potential. The company isn’t just sitting on its laurels, happily collecting royalties; it’s actively looking for new royalty streams to add to its portfolio. This forward-thinking strategy signals to investors that DIV is committed to long-term growth. Each new acquisition brings in additional revenue, further diversifying and strengthening the company’s financial position.

Moreover, DIV’s existing royalty partners are solid, established businesses. This includes well-known names like Mr. Lube and Sutton, which have proven track records of success. These partnerships provide a reliable income base, reassuring investors that their dividends are backed by stable and successful operations.

Impressive streak

DIV stock has also been on a tear in terms of earnings. Back in the third quarter (Q3) of 2023, DIV stock delivered a stellar performance. They raked in a whopping $11.2 million in royalty income. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was a solid $8.9 million, showing that they’re not just making money but doing it efficiently. Net income hit $5.2 million, a testament to their robust financial health. 

As the year drew to a close, Q4 2023 didn’t disappoint. DIV saw their royalty income climb to $12 million, setting a new high score in their revenue game. Adjusted EBITDA followed suit, reaching $9.4 million. Net income for the quarter was $5.6 million, continuing the upward trend. It was clear that DIV was ending the year with a bang, leaving investors eagerly looking forward to what’s next.

Rolling into Q1 2024, DIV kept the momentum going strong. Royalty income jumped to $12.5 million, proving that their growth wasn’t just a holiday miracle. Adjusted EBITDA reached $9.8 million, and net income was a healthy $5.9 million. This quarter showcased the company’s resilience and knack for generating steady cash flows. New acquisitions continued to contribute positively, and core partners remained reliable. Analysts and investors were grinning ear to ear, seeing DIV’s strategy of diversification and growth paying off quarter after quarter.

Bottom line

Over the past few quarters, DIV Stock has consistently increased their royalty income, with Q1 2024 hitting a high of $12.5 million. Their strategy is as sharp as a tack: they diversify across multiple, solid business partners like Mr. Lube, ensuring they’re not putting all their eggs in one basket. This diversification means that even if one partner faces a hiccup, others keep the revenue flowing smoothly.

But the cherry on top? DIV’s generous dividend yield makes it a favourite for income-focused investors. They’ve got a knack for finding and acquiring new royalty streams, promising even more growth down the line. So, DIV stock isn’t just a good dividend stock. It blends stability, growth, and high income in a way that makes you want to hold onto them for the long haul.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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