Investing in monthly dividend stocks with an attractive yield enables you to begin a passive-income stream at a low cost. However, as dividends are not guaranteed, it’s crucial to identify companies that can maintain and grow these payouts over time.
One TSX stock with a monthly dividend is Bridgemarq Real Estate Services (TSX: BRE), which offers shareholders a forward yield of almost 11.6%. Let’s see if the TSX dividend stock should be part of your income portfolio right now.
An overview of Bridgemarq Real Estate Services
Valued at $133 million by market cap, Bridgemarq Real State provides various services to residential real estate brokers in Canada. It offers information, tools, and services that assist its customers in providing real estate sales services. With a franchise network of over 20,000 realtors across +700 locations, Bridgemarq Real Estate operates under the brand names Royal LePage, Via Capitale, and Proprio Direct.
In recent years, Bridgemarq has diversified its revenue base by adding brokerage operations, which complements its successful franchise business and allows it to capture additional growth across the real estate sector.
The TSX stock has returned just 1.3% to shareholders in the last 10 years. However, if we account for dividend reinvestments, cumulative returns are much higher at 149%.
A strong performance in Q2 of 2024
Earlier this year, Bridgemarq acquired certain real estate brokerages from Brookfield Business Partners for total proceeds of $40.9 million. This acquisition allowed Bridgemarq to report revenue of $110.1 million in Q2 of 2024, up from just $12.8 million in the year-ago period. The top-line growth was attributed to the inclusion of gross commission income, revenue from acquisitions, improving market conditions, and franchise fee increases.
Bridgemarq generated net income of $10.6 million, or $0.17 per share, compared to earnings of $1.1 million, or $0.12 per share, in the year-ago period.
Its operating cash flow almost tripled year over year to $10.5 million in the second quarter (Q2). In the last 12 months, Bridgemarq’s free cash flow has totalled $19.3 million, while its dividend payout is roughly $12.5 million each year. Given a payout ratio of 65%, Bridgemarq can continue to target acquisitions and strengthen the balance sheet.
How is the Canadian real estate sector performing?
The cyclical real estate sector suggests Bridgemarq would underperform in periods of economic contraction or elevated interest rates. While additional interest rate cuts are on the horizon, the Canadian residential real estate market contracted by 4% year over year to $102 billion. Further, average selling prices fell by 3%, and unit sales were down 2% in the June quarter. Compared to Q1, average selling prices rose 1%, and unit sales were up 40%.
Vancouver and Toronto are the two largest cities in Canada, and the real estate sector in these regions has grown at an astonishing pace over the past two decades.
The real estate market in the Greater Toronto Area rose by 17% to $23.5 billion in Q2, driven by a 15% drop in unit sales and a 1% decline in selling prices. Compared to Q1, total transactional dollar volume was up 32% due to a 24% increase in unit sales and a 6% increase in selling prices.
The Greater Vancouver real estate market fell 11% to $10.6 billion in Q2 due to a 13% decline in unit sales and a 3% increase in selling prices.
