Most Canadian dividend stocks pay quarterly dividends to shareholders. However, investors can find plenty of monthly dividend-paying stocks that offer distributions each month. This way, you can see the returns from your investment grow your balance each month instead of waiting three months at a time. Monthly distributions also mean you can reinvest each month to accelerate your wealth growth further.
If you create a high-quality portfolio of monthly dividend stocks in a Tax-Free Savings Account (TFSA), you can compound the advantage even more because there are no taxes on withdrawals from the TFSA. Among the monthly dividend stocks, Whitecap Resources Inc. (TSX: WCP) is a good example to consider.
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Whitecap Resources
Whitecap Resources is a $20.54 billion market-cap firm that engages in acquiring, developing, and producing crude oil and natural gas. The mid-size energy producer has oil and natural gas assets throughout the Western Canadian Sedimentary Basin. Unlike its peers in the Canadian oil and gas sector, which pay quarterly distributions, Whitecap pays its investors each month.
Currently, Whitecap Resources pays out $0.0608 per share each month, which turns into $0.73 per share annually. As of this writing, Whitecap Resources stock trades at $16.92 per share, translating its monthly payouts to a 4.31% annualized dividend yield. This amount will be added to your account on a schedule.
This means buying 10,000 shares of the stock will translate to $610 in monthly distributions, totaling $7,320 per year in entirely tax-free income within a TFSA.
Why is it a good buy?
High-yielding dividends seem attractive, but should not be the only factor when deciding to invest. If the underlying business is not fundamentally solid enough, it cannot sustain high-yielding payouts. Ultimately, that can lead to a suspension, cuts, or a complete stoppage of distributions.
Fortunately, investors have less cause for concern with Whitecap Resources. The company reported the production of roughly 8,000 barrels above its internal forecast in barrels of oil equivalent per day. Due to its outperformance, Whitecap raised its production guidance for the second time in a year. Lower operating costs, strong commodity prices, and increased efficiency mean a stronger balance sheet.
When investing in a stock to capture reliable dividend distributions, investors seek exactly the kind of factors we see with Whitecap Resources. The chief financial officer (CFO) at Whitecap, Thanh Kang, said that the company plans to keep increasing production and cash flow by 3-5% per share, while hiking dividends over time.
Foolish takeaway
If a company’s management is talking about increasing payouts amid such a volatile market, it goes to show how much the company believes in its ability to drive growth. I think Whitecap Resources stock can be an excellent foundational holding for a TFSA portfolio geared toward long-term growth.
While I would not advise going all out and investing everything you have to own Whitecap Resources stock, I would suggest allocating some space in your portfolio for it. Between its disciplined spending, resilient business model, and high-yielding returns, I think it can be an excellent holding in an income-focused TFSA portfolio.
