Generating passive income is the goal for many Canadians, and for good reason. Who wouldn’t want to earn money while doing absolutely nothing? The problem is that most passive income ideas aren’t actually that passive. Rental properties require maintenance, dealing with tenants, and a lot of upfront capital. Even side hustles take time. That’s why dividend stocks that pay cash every month stand out.
Once you’ve done the research and bought high-quality companies, there’s nothing else to do except keep an eye on your portfolio to stay up to date with your investments and, of course, collect the income.
Furthermore, if you’re investing through a registered account like the Tax-Free Savings Account (TFSA), all that income you earn is completely tax-free.
Not to mention, dividend stocks can also gain value, which means you’re not just earning regular income; you’re also building long-term capital gains. That combination of steady cash flow and potential growth is exactly what makes dividend investing so effective, especially inside a TFSA where every dollar stays in your pocket.
So, with that in mind, if you’ve got hard-earned cash that you’re looking to put to work and want to boost the yield that your portfolio generates, here’s one of the top Canadian stocks on the TSX with a whopping 6.8% dividend yield that pays you cash every single month.
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One of the best Canadian dividend stocks that pays you cash every month
There are several monthly dividend stocks to consider adding to your portfolio on the TSX, but one of the very best is Pizza Pizza Royalty (TSX:PZA).
Pizza Pizza is an ideal investment because of its proven track record and simple business model that’s made specifically for dividend investors.
The stock simply earns a royalty on all sales done at Pizza Pizza and Pizza 73 locations nationwide. This creates a steady stream of income, and because Pizza Pizza has only minimal expenses, the stock can essentially return all of its earnings to investors through its dividend.
For example, over the last four quarters, the dividend stock earned roughly $40 million in revenue from royalty payments and spent just $730,000 on expenses to run the company.
That resulted in operating income of more than $39 million, or an operating margin of more than 98%. From there, it paid just shy of $1.3 million in interest expenses while earning just over $400,000 in interest and investment income, giving it a pre-tax income of roughly $38.4 million.
So, after paying roughly $7.3 million in taxes, Pizza Pizza earned a net income of more than $31 million on just over $40 million of revenue.
This simple business model is ideal for investors because, with only minimal expenses, it makes forecasting future earnings and dividend payments much more straightforward.
Its expenses hardly ever fluctuate quarter to quarter or year over year, so the main focus for investors and management is to follow how well Pizza Pizza can grow its same-store sales, which directly leads to dividend increases.
How is Pizza Pizza faring in this economic environment?
Although restaurant stocks can take a hit as economic growth slows down, since eating out is one of the easiest costs for consumers to cut, Pizza Pizza is well-positioned compared to its peers.
The company has one of the best-known brands in Canada and is well-known for its low-cost options and convenient operating times, often open later than most other restaurants it competes against.
Therefore, it’s no surprise that in addition to its expenses hardly ever fluctuating, its revenue year over year isn’t very volatile either.
This simple business model means the stock likely won’t offer significant growth over the long haul. However, it also makes it one of the best and most reliable dividend stocks, especially when it offers a dividend yield of roughly 6.8%.
So, if you’re looking for a dividend stock that can boost your passive income and return cash to you monthly, Pizza Pizza is undoubtedly a stock you’ll want to consider.
