3 Top Royalty Stocks With Dividend Yields of up to 9.1 Percent

Here’s why you can Invest in profitable royalty stocks that offer shareholders tasty dividend yields in 2024.

| More on:
funds, money, nest egg

Image source: Getty Images

Investing in asset-light royalty companies is a great strategy for those looking to begin a passive-income stream at a low cost. Typically, royalty companies generate a steady stream of income due to ownership stakes in other profitable ventures. Due to low operating costs, royalty companies can distribute the majority of their royalty income to shareholders via dividends. Here are three top Canadian royalty stocks with dividend yields of up to 9.1%.

Alaris Equity Partners stock

Valued at $726 million by market cap, Alaris Equity Partners (TSX:AD.UN) pays an annual dividend of $1.36 per share, indicating a forward yield of 8.5%. Alaris provides alternative financing to private companies in exchange for distributions, dividends, and interest with the objective of generating stable and predictable cash flows.

In May 2024, Alaris invested US$20 million in Cresa in exchange for an annual payout of US$2.8 million. Cresa is a commercial real estate advisory company representing tenants with 50 offices in North America. Moreover, Alaris is committed to funding two follow-up investments totalling US$25 million in Cresa in return for additional preferred equity.

Alaris also announced an additional investment of US$22 million in The Shipyard. To date, Alaris has invested US$70 million in The Shipyard and is expected to earn US$9.8 million in annual dividends.

These acquisitions should drive revenue, cash flow and dividends higher for Alaris. The TSX dividend stock ended the first quarter (Q1) of 2024 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $39.1 million, or $0.86 per share, while its payout ratio was quite reasonable at 66%.

Diversified Royalty stock

Valued at $451 million by market cap, Diversified Royalty (TSX:DIV) offers you a tasty dividend yield of 9.1%. Its weighted average organic royalty growth in Q1 stood at 6%, while revenue increased by 22.2% to $15.1 million. Diversified’s distributable cash stood at $9.6 million in the March quarter, indicating a payout ratio of 97.2%, which is quite high.

In Q1, the company closed its public offering for gross proceeds of $54 million, providing it with the liquidity to target accretive acquisitions and lower balance sheet debt.

Analysts remain bullish on the TSX dividend stock and expect it to gain 38% in the next 12 months.

Decisive Dividend stock

The final royalty stock on my list is Decisive Dividend (TSXV:DE). Valued at $143 million by market cap, Decisive Dividend offers you a yield of 7.5%. An acquisition-oriented company, Decisive Dividend is focused on opportunities in the manufacturing sector.

In the last two years, Decisive Dividend has completed eight acquisitions. The company emphasized it is building a strong and growing acquisition prospect pipeline. To date, Decisive Dividend has assembled a portfolio of profitable manufacturing businesses focused on achieving long-term organic growth.

In the last 24 months, Decisive Dividend has invested $3.8 million in capital expenditures to increase the manufacturing capabilities of its holding companies, which has resulted in higher cash flows. With a payout ratio of 66%, Decisive Dividend increased its dividend by 12.5% to $0.54 per share in Q1 of 2024.

In addition to its high dividend, Decisive Dividend stock trades at a 29% discount to consensus price target estimates.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Decisive Dividend. The Motley Fool recommends Alaris Equity Partners Income Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Cogs turning against each other
Dividend Stocks

How Interest Rate Cuts Affect REITs

Now is a good time to investigate Canadian REITs and take a position in the form of stocks or exchange…

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

3 Affordable Passive-Income Stocks That Pay Monthly

These three monthly-paying dividend stocks could boost your passive income.

Read more »

Dividend Stocks

Retirees: 2 High-Yield Dividend Stocks to Buy in July

Retirees can rely on these dividend stocks for steady passive income and high yields.

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

CPP Benefits Not Enough? This Top Dividend Stock Can Help Fund Your Retirement

Dividend stocks like Fortis Inc (TSX:FTS) have funded many a retirement.

Read more »

A steel grain silo storage tank with solar panel in a yellow canola field in bloom in Alberta, Canada.
Dividend Stocks

The Ultimate TSX Stock to Buy With $1,000 Right Now

Once at triple-digit prices, Nutrien stock (TSX:NTR) now offers a steal of a deal for long-term growth as well as…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Set and Forget: 1 Dividend Stock That Could Create $1,000 in Tax-Free Passive Income in 10 Years

Enbridge operates a low-risk business that has allowed the TSX dividend giant to raise its payout by 10% annually since…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Passive Income: How to Make $106 Per Month Tax Free

Holding quality, high-yield dividend stocks such as Freehold Royalties in a TFSA can help you earn tax-free income for life.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on it

Stocks like First National Financial (TSX:FN) pay you monthly. You can also earn monthly dividends through portfolio diversification.

Read more »