This Stock Yields 5.9% and Pays Out Each Month

A 5.9% yield looks great, but Diversified Royalty’s real appeal is its growing mix of brand royalties.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Favorite Investment Quote

“October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 27, 4:20 pm EDT

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Key Points

Diversified Royalty pays monthly dividends by collecting royalties from many different consumer brands, not running stores.
Recent results were solid, but the payout ratio topped 100%, so dividend safety needs watching.
Growth could come from new royalty additions and a bigger Mr. Lube + Tires deal, though it adds risk.

Monthly income still gets attention. When markets feel jumpy, investors often look for stocks that pay them to wait. The catch is finding income that does not rely on one fragile business. A big yield can look tempting, but it only helps if the company can keep the cash coming. That’s where Diversified Royalty (TSX:DIV) earns a closer look, with a yield at 5.9%.

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DIV

Diversified Royalty is not a restaurant chain, tire shop, tutoring company, or cleaning business. Instead, it buys royalty streams from brands with many locations. Its portfolio includes Mr. Lube + Tires, BarBurrito, Oxford Learning Centres, Nurse Next Door, Stratus Building Solutions, Cheba Hut, AIR MILES, Sutton, and Mr. Mikes. That structure gives investors exposure to consumer spending without owning the day-to-day operations of each brand.

That’s relevant now as Canadian consumers still face pressure from high living costs, mortgage resets, and slower growth. In that kind of market, investors may prefer companies with diversified cash streams and a clear dividend policy. Diversified Royalty fits that lane better than many small-cap income stocks. It collects royalties from multiple partners, across several categories, instead of relying on one storefront concept.

Into earnings

The latest quarter looked steady, with a few caveats. Revenue climbed 11.8% year over year to $17.5 million in the first quarter of 2026. Adjusted revenue rose 11% to $18.8 million, while distributable cash increased 10.4% to $12 million. Those numbers support the income story, especially because the dividend stock’s royalty model can produce high-margin cash flow.

Still, investors should not ignore the payout ratio. Diversified Royalty’s payout ratio reached 101.1% in the quarter, up from 95.8% a year earlier. Management noted first quarters usually carry a higher payout ratio because of seasonality, especially at Mr. Lube + Tires. That helps explain the number, but it also shows why investors need to watch cash flow, not just yield.

The good news is the dividend stock keeps adding growth pieces. BarBurrito added nine eligible restaurants to its royalty pool on March 1, 2026. Cheba Hut also added an incremental US$900,000 annualized royalty starting April 1. These are small moves on their own, but show the playbook. Diversified Royalty can grow through same-store sales, fixed contractual increases, and new royalty purchases. It also benefits when stronger partners expand, raise sales, or improve their franchise systems without forcing DIV to run each location itself.

What to watch

The biggest development may be Mr. Lube + Tires. Diversified Royalty announced an agreement to acquire the franchisor business, which would deepen its connection to its largest royalty partner. Mr. Lube + Tires generated $7.5 million of adjusted revenue in the first quarter, making it the largest contributor in the portfolio. Its same-store sales rose 3% during the quarter, even with unseasonal weather weighing on consumer behaviour.

That deal could give Diversified Royalty more control and potential upside. It also adds execution risk. Buying more of a business can create more opportunity, but it also moves the dividend stock closer to operations. Investors should watch how management funds, integrates, and grows the asset.

At today’s yield, Diversified Royalty looks appealing for investors who want monthly cash and can handle small-cap risk. The dividend stock hasalready climbed sharply over the past year, so it may not offer the same bargain it once did. A payout ratio above 100% also deserves respect. So does the company’s debt, because royalty deals still need careful financing.

Bottom line

Even so, this is not a yield trap. Diversified Royalty owns a portfolio of recognizable brands, keeps adding royalty streams, and pays investors every month. In fact, here’s what $7,000 could bring in today.