Amid last week’s interest rate cut, the Bank of Canada’s benchmark interest rate stands at 2.5%. Besides, analysts are predicting one more rate cut this year. In this environment of declining interest rates, investors should consider high-quality Canadian dividend stocks that offer attractive monthly payouts to secure a steady passive income. Meanwhile, here are my three picks.
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SmartCentres Real Estate Investment Trust
SmartCentres Real Estate Investment Trust (TSX: SRU.UN), which offers an attractive dividend yield of 7%, is my first pick. Given its 197 strategically located mixed-use properties and solid tenant base, the Toronto-based REIT enjoys a healthy occupancy rate, standing at 98.6% in the recently reported second-quarter earnings. The company has also extended or finalized 82.1% of leases that are expiring this year, with a rental growth rate of 8.5%.
Moreover, the demand for retail space has been increasing amid supply constraints resulting from sluggish construction and population growth. Amid growing demand, SmartCentres continues to expand its portfolio, with approximately 58.9 million square feet of developmental approvals. Of these approvals, around 0.8 million square feet of properties are under construction. The company also opened two self-storage facilities in Toronto and one in Dorval last quarter. Meanwhile, the construction of facilities in Montreal and Laval is underway, with the company expecting them to open next year.
Along with these expansions, renewal with rental growth could boost SmartCentres’s financials in the coming quarters, thereby making its future payouts more secure.
Whitecap Resources
Another monthly-paying dividend stock, Whitecap Resources (TSX: WCP), which currently offers a forward dividend yield of 6.5% is my second pick. The company recently combined with Veren to become Canada’s seventh-largest oil and natural gas producer. The merger also increased its production capabilities while strengthening its balance sheet through lower leverage and strong liquidity.
WCP has realized early synergies by integrating Veren’s assets and workforce, leading to cost consolidation and an improved credit profile. In addition, the oil and natural gas producer projects further capital efficiency gains and operating cost savings within the next 6 to 12 months by utilizing shared insights and expertise from its consolidated portfolio. Additionally, WCP plans to invest $1.2 billion in the second half of this year, thereby strengthening its production capabilities. The company’s management also predicts steady long-term organic growth of 3–5%. These growth initiatives could support its future dividend payouts.
Pizza Pizza Royalty
My final pick would be Pizza Pizza Royalty (TSX: PZA), which operates 694 Pizza Pizza and 100 Pizza 73 brand restaurants through franchisees. It collects royalties from its franchisees based on their sales. Therefore, its financials are less prone to fluctuations in commodity prices and labour wage inflation. Additionally, the company intends to return all the available cash to its shareholders. However, given the issue of seasonal variations inherent to the restaurant sector, and to smooth out its dividend payouts, the company makes allowances for certain reasonable reserves.
Despite the headwinds in the quick-service restaurant sector, PZA posted a healthy same-store sales increase of 2.1% in the second quarter, driven by menu innovations and strategic sports partnerships. The company is also expanding its store network and anticipates increasing its store count by 2–3% this year. It is also working on its renovation program, which could support its same-store sales growth. Considering its improving sales and expansion of its store network, I believe PZA is well-equipped to support its future dividend payouts. At present, the stock offers a forward dividend yield of 6.1%.
