For passive-income investors looking to give themselves a big, fat raise as the Bank of Canada (BoC) starts to hike rates to combat what remains of inflation, there are still many options across the board. Undoubtedly, the midstream and upstream energy plays and REITs (Real Estate Investment Trusts) are still well-known corners of the TSX Index that have rich yields around or well north of 5%.
In this piece, we’ll check in on an underrated monthly dividend payer within the Canadian fast-food scene. Enter shares of Pizza Pizza Royalty (TSX: PZA), which currently sports a towering 7.2% dividend yield. And, yes, it’s paid monthly.
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Time to grab a slice of this monthly dividend payer
Undoubtedly, for investors comfortable investing in mid-cap names, I do think the pizza delivery chain is worth a closer look, especially as the firm looks to improve its positioning in the value wars. Undoubtedly, the fast-food scene, as a whole, has been under quite a bit of pressure in recent quarters, thanks in part to lingering inflation. Whenever there’s a bit of an affordability crisis, households opt to do what they can to trim away at the monthly expenses.
Of course, one of the lowest-hanging fruit to cut is eating out or ordering in. Indeed, shopping at the discount grocery store and cooking one’s own meals (especially meal planning) can be a massive money saver that helps one better cope with the sky-high cost of living. Unfortunately for Pizza Pizza Royalty, the current macro environment has been less than ideal. But the good news is that the worst might already be in the rearview.
As the firm looks to shine a brighter light on its value proposition in today’s tough economy while taking steps to enhance operating efficiencies, I do think that investors, especially fans of Pizza Pizza (or Pizza 73 as it’s known in Alberta), should be more than willing to give the name the benefit of the doubt.
Why Pizza Pizza’s dividend is worth eating up
While the dividend is quite stretched and the yield is north of 7%, it’s not at its breaking point. Are things getting a bit tight? Most definitely. But if there’s a firm that can manage through a difficult stretch, it’s Pizza Pizza.
At the end of the day, ordering a pizza, especially a Pizza Pizza pizza, isn’t exactly a big splurge if we’re talking about feeding a large family. Arguably, some of the deals could offer a value proposition that’s right up there with eating at home. With the new chicken sandwich offerings (yes, Pizza 73 has joined the chicken sandwich wars), I do think the firm has the means to expand outside of its circle of competence to give its sales a bit of a jolt.
In my view, expanding into new areas beyond pizza represents a low-risk effort that’s worth pursuing, especially as the firm looks to cater to the ever-changing tastes of consumers. Perhaps the biggest advantage that Pizza Pizza has is its delivery advantage. When it comes to big families, more expansive options are key. Not everyone in a household has a taste for pizza. With new offerings, like chicken sandwiches, households can now make everyone happy without having to order from multiple chains.
As Canadians grow sick of eating at home, my guess is they’ll start looking to high-value order-in options and, in my view, that starts with firms like Pizza Pizza. The chain shows that you don’t need to break the bank to have good food show up on your doorstep. The 7.2% dividend yield looks safe, in my view, and with shares already on the mend, I’d not be afraid to be a net buyer of the underrated pizza play.
