Earlier this week, the Bank of Canada cut interest rates by 0.25%, the seventh rate cut in a row. With falling interest rates, investors should consider adding monthly-paying dividend stocks to earn a stable passive income. Meanwhile, here are my three top picks.
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Pizza Pizza Royalty
Pizza Pizza Royalty (TSX: PZA) operates a highly franchised restaurant business, collecting royalty from its franchisees based on their sales. Therefore, its financials are less susceptible to rising commodity prices and wage inflation while generating healthy cash flows. It intends to return all the available cash to its shareholders after allowing for reasonable reserves, which helps it smoothen its dividend payouts amid seasonality issues inherent to the restaurant industry.
The owner of Pizza Pizza and Pizza 73 brands expects its value propositions, menu innovations, and enhancements to its dine-in and digital experiences to support its same-store sales growth in the coming quarters. Further, the company added 45 restaurants to its royalty pool at the beginning of this year. However, with the removal of 25 restaurants that ended their operations, the restaurant count in its royalty pool increased by 20 to 794. Amid these growth initiatives, I expect PZA to continue paying dividends at a healthier rate. Meanwhile, its current dividend payout of $0.0775/share translates into an attractive forward dividend yield of 7.01%.
Extendicare
With the growth in the aging population, I expect the demand for senior living services to rise, thus making Extendicare (TSX: EXE) an excellent buy. The Markham-based company also reported an impressive fourth-quarter performance last month, with its top line growing by 11.8% to $391.6 million. Home healthcare average daily volume growth, rate hikes, growth in managed services, and increased long-term care (LTC) funding have boosted its financials. Supported by its topline growth, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 38.2% to $38.7 million.
Moreover, Extendicare is working on acquiring nine Class C LTC homes in Ontario and Manitoba from Ravera. The management expects to close the transaction, which could add around 1,396 beds to the company’s portfolio, in the second quarter of this year. Further, it recently opened two homes in a joint venture with Axium, including a 192-bed home in Kingston, Ontario, and a 256-bed home in Stittsville, Ontario. It has also begun the construction of two new LTC projects in Ontario and hopes to complete both projects in the first half of 2027. Considering its solid financials and healthy growth prospects, I believe Extendicare’s future dividend payouts are safe. Further, the company has raised its monthly dividend by 5% to $0.042/share, translating into a forward dividend yield of 3.77%.
NorthWest Healthcare Properties REIT
Given its defensive healthcare portfolio, government-backed tenant base, and long-term lease agreements, NorthWest Healthcare Properties REIT (TSX:NWH.UN) enjoys healthy occupancy and collection rates, thus supporting its financial growth. Last year, the real estate investment trust (REIT) focused on optimizing its portfolio, simplifying its operations, and strengthening its balance sheet. It sold around $1.4 billion of non-core assets and utilized the net proceeds to reduce its debt by $1.1 billion. It also refinanced an additional debt of $1 billion, thus strengthening its balance sheet. Further, it has also renewed around 80% of its lease expiries at the same or higher rental rates.
Moreover, last month, NorthWest Healthcare achieved an investment-grade credit rating, which could lower its borrowing costs. The company is streamlining its operations and leveraging technology to drive margins. Amid improving operating performances and financial position, I believe NorthWest Healthcare is well-positioned to continue paying dividends at a healthier rate. Its current monthly payout of $0.03/share translates into a juicy forward dividend yield of 7.29%.
