If you’re an investor who’s looking to generate as much income as possible, then there’s no question that buying high-quality monthly dividend stocks is one of the best ways to do it.
However, with that in mind, not all dividend stocks are created equal. That’s why it’s important to know exactly what you’re looking for, especially if your goal is to generate steady and meaningful passive income.
For example, some dividend-paying stocks only offer small yields because they reinvest most of their earnings back into the business for growth. These can be great long-term investments, but they’re not ideal if you want consistent income now.
Then there are stocks that still grow steadily but return more cash to shareholders through stronger dividend payouts. These strike a balance between income and long-term upside.
But if your primary goal is to maximize cash flow, monthly, consistently, and without much effort, then you want the kind of dividend stock that distributes the majority of its earnings directly to investors. That’s what makes certain royalty stocks so attractive.
And right now, one of the best stocks on the TSX for passive income seekers is Pizza Pizza Royalty (TSX:PZA), a stock specifically designed to return as much cash as possible back to its investors.
Not only does Pizza Pizza offer a massive 6.1% yield, but the stock also pays that dividend monthly, making it one of the best cash flow machines you can add to your portfolio today.
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Why is Pizza Pizza an ideal monthly dividend stock?
There are several reasons why Pizza Pizza stands out as one of the best stocks to buy for simple, reliable monthly dividends.
First is its business model and brand power. Pizza Pizza is one of the most recognizable quick-service restaurant brands in Canada. And unlike traditional restaurant businesses, the stock doesn’t own or operate the locations directly. Instead, it earns a royalty on the sales generated across its nationwide network.
That makes it an asset-light business, focused more on growing total system sales than managing the profitability of each individual store.
So, although new restaurant openings help expand the business gradually, the most important metric to watch is same-store sales growth (SSSG).
A simple business model with consistent results
Because Pizza Pizza has hundreds of locations across the country, and because it’s a convenient, low-cost dining option, sales tend to remain stable, even through volatile market environments.
That stability translates to predictable revenue, which allows Pizza Pizza stock to return nearly all its income to investors through the monthly dividend.
As a result, SSSG becomes a key indicator. Prolonged declines could signal a temporary dividend cut, while consistent growth may lead to a dividend increase. It’s a straightforward model that makes Pizza Pizza an ideal monthly income stock.
For example, over the last four quarters, Pizza Pizza generated roughly $40 million in revenue from royalties. However, it paid just under $750,000 in expenses to run the company, generating an operating income of more than $39 million.
It then paid roughly $1 million in interest expenses and $7 million in taxes, resulting in a net profit of more than $31 million. Therefore, not only is its revenue highly predictable, but its expenses are predictable as well, allowing Pizza Pizza to pay out essentially all of its income.
So, if you’re looking to boost your passive income and buy a high-quality, simple-to-understand monthly dividend stock with an attractive yield, Pizza Pizza is easily one of the best options on the TSX.
