Generating reliable passive income is one of the smartest things you can do with your investments. When you own stocks that pay consistent dividends month after month, it gives you real flexibility.
Not only do monthly dividend stocks give you the opportunity to reinvest those payouts to compound faster, but you also have the option to use them to cover living expenses without selling shares, or just build a bigger cash position for the next market dip or buying opportunity.
That’s why monthly payers stand out; they give you cash flow more often than quarterly ones, which helps with budgeting or reinvesting sooner. And while there are a handful of high-quality, monthly dividend stocks on the TSX, there’s no doubt that Pizza Pizza Royalty (TSX:PZA) is a top pick.
The business is simple and defensive, which makes it one of the most reliable ways to generate passive income on the TSX. More importantly, though, as a royalty company, the stock was made for dividend investors.
So, if you’re looking to boost your passive income without taking on huge risk, here’s why Pizza Pizza is worth loading up on.
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Why Pizza Pizza Royalty is such an ideal stock for passive income seekers
The main reason why Pizza Pizza is one of the best monthly dividend stocks you can buy is due to its structure and strategy. The stock is not only built specifically for dividend investors, but its business model is also incredibly simple, making it easy to understand for any investor.
The most important thing to understand is that Pizza Pizza doesn’t own or operate Pizza Pizza or Pizza 73 restaurants itself. Instead, it simply collects its percentage of sales, most of which ends up being paid back to investors through its monthly dividend.
This simple business model not only makes it easy to understand for investors, but it’s also incredibly low-risk.
People eat pizza no matter what the economy does. Furthermore, Pizza Pizza is well-known to be a more convenient and more affordable option compared to many of its peers.
And even when the economy does slow down, Pizza Pizza’s revenue tends to be quite sticky and predictable. This makes the dividend more reliable for investors, which is why the fund can aim to pay out essentially all its after-tax earnings.
Growth drivers and why it’s worth loading up on now
In addition to its defensive nature and simple business model and the significant passive income it generates monthly, Pizza Pizza Royalty has built-in long-term growth potential. The company won’t ever be an explosive growth stock, but over the long haul, there is potential for continued dividend increases.
For example, Pizza Pizza is constantly assessing how it can improve same-store sales, whether it’s through menu updates, digital ordering, delivery apps, or marketing pushes.
More importantly, though, the best way to rapidly increase total sales is to continue opening new stores in underserved areas across Canada. As the brand expands, royalty revenue rises with almost no extra cost to the fund. That means more cash for distributions over time.
In fact, Pizza Pizza is even looking for opportunities internationally in the coming years, with a few stores already opened in Mexico.
Therefore, given the reliable passive income it continues to generate for investors each month, the easy-to-understand business model, and the long-term growth potential it offers, there’s no doubt Pizza Pizza is one of the best picks to buy now, especially while it offers an attractive yield of 5.8%.
