The pensions that Canadian investors receive are decent enough, but they’re nowhere near enough to cover all their expenses, especially considering that some of these expenses get inflated in old age (particularly medical expenses).
This is why people are encouraged to save and invest in their working years so they have a sufficient sum for their retirement years. A substantial part of that sum can be invested into dividend stocks to generate a secondary income to augment the pension amount.
Quarterly dividends are the norm but they might be challenging for many retirees to manage, so for them, monthly dividend payers might be an easier choice. If they buy these dividends inside the Tax-Free Savings Account (TFSA), the income will not be added to their tax bill.
A restaurant royalty income fund
Pizza Pizza Royalty (TSX:PZA) is an income fund with interest in two large pizza chains, Pizza Pizza and Pizza 73, and a much smaller chain called PZA Pizzeria. There are about 774 restaurants in the royalty pool from which the company draws its revenues.
Even though it technically falls under discretionary spending and the business model is uniquely vulnerable to negative catalysts like the pandemic (that caused many restaurants to pause service), the dividends have been surprisingly consistent.
The company did slash its payouts in 2020, but it started raising them right away, and the number is currently higher than what it slashed it down to during the pandemic. The current yield is quite generous at 7%. So, if you invest about $30,000 in the stock, you can start a monthly passive income of about $175. The payout ratio has been close to the edge (100%) but only crossed over once in the last decade.
An energy company
Even though many energy stocks in Canada offer dividends, few are currently offering a yield as generous as Whitecap Resources (TSX:WCP). This oil company is going through a modest bearish phase, with the price down about 14% from its 2022 peak. The stock might be considered undervalued, with a price-to-earnings of just 8, but it’s in line with most others in the sector.
This modest discount has made its yield even more attractive. At a 7.2% yield, this stock can help you generate about $180 a month with just $30,000 invested. The company also slashed its dividends in 2020, but it’s not a singular occasion.
Whitecap also cut its dividends in the past when the energy sector in Canada received a significant blow. However, as long as the energy sector is healthy, you can expect generous monthly dividends from this stock.
Foolish takeaway
At their current yields, the two companies can help you generate a monthly income of about $355 with capital of about $60,000 evenly split between them. The monthly frequency offers a layer of convenience to Canadian pensioners, as they can simply augment this monthly income into their primary income source (pensions).
