3 Top Royalty Stocks With Dividend Yields of up to 9.1 Percent

Here’s why you can Invest in profitable royalty stocks that offer shareholders tasty dividend yields in 2024.

| More on:

Investing in asset-light royalty companies is a great strategy for those looking to begin a passive-income stream at a low cost. Typically, royalty companies generate a steady stream of income due to ownership stakes in other profitable ventures. Due to low operating costs, royalty companies can distribute the majority of their royalty income to shareholders via dividends. Here are three top Canadian royalty stocks with dividend yields of up to 9.1%.

Alaris Equity Partners stock

Valued at $726 million by market cap, Alaris Equity Partners (TSX:AD.UN) pays an annual dividend of $1.36 per share, indicating a forward yield of 8.5%. Alaris provides alternative financing to private companies in exchange for distributions, dividends, and interest with the objective of generating stable and predictable cash flows.

In May 2024, Alaris invested US$20 million in Cresa in exchange for an annual payout of US$2.8 million. Cresa is a commercial real estate advisory company representing tenants with 50 offices in North America. Moreover, Alaris is committed to funding two follow-up investments totalling US$25 million in Cresa in return for additional preferred equity.

Alaris also announced an additional investment of US$22 million in The Shipyard. To date, Alaris has invested US$70 million in The Shipyard and is expected to earn US$9.8 million in annual dividends.

These acquisitions should drive revenue, cash flow and dividends higher for Alaris. The TSX dividend stock ended the first quarter (Q1) of 2024 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $39.1 million, or $0.86 per share, while its payout ratio was quite reasonable at 66%.

Diversified Royalty stock

Valued at $451 million by market cap, Diversified Royalty (TSX:DIV) offers you a tasty dividend yield of 9.1%. Its weighted average organic royalty growth in Q1 stood at 6%, while revenue increased by 22.2% to $15.1 million. Diversified’s distributable cash stood at $9.6 million in the March quarter, indicating a payout ratio of 97.2%, which is quite high.

In Q1, the company closed its public offering for gross proceeds of $54 million, providing it with the liquidity to target accretive acquisitions and lower balance sheet debt.

Analysts remain bullish on the TSX dividend stock and expect it to gain 38% in the next 12 months.

Decisive Dividend stock

The final royalty stock on my list is Decisive Dividend (TSXV:DE). Valued at $143 million by market cap, Decisive Dividend offers you a yield of 7.5%. An acquisition-oriented company, Decisive Dividend is focused on opportunities in the manufacturing sector.

In the last two years, Decisive Dividend has completed eight acquisitions. The company emphasized it is building a strong and growing acquisition prospect pipeline. To date, Decisive Dividend has assembled a portfolio of profitable manufacturing businesses focused on achieving long-term organic growth.

In the last 24 months, Decisive Dividend has invested $3.8 million in capital expenditures to increase the manufacturing capabilities of its holding companies, which has resulted in higher cash flows. With a payout ratio of 66%, Decisive Dividend increased its dividend by 12.5% to $0.54 per share in Q1 of 2024.

In addition to its high dividend, Decisive Dividend stock trades at a 29% discount to consensus price target estimates.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Decisive Dividend. The Motley Fool recommends Alaris Equity Partners Income Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

Dividend ETFs like BMO Canadian Dividend ETF (TSX:ZDV) can add passive income to your portfolio.

Read more »

space ship model takes off
Dividend Stocks

Is WSP Global Stock a Buy for its 0.6% Dividend Yield?

Here's why investors should look beyond WSP Global stock's tiny dividend yield.

Read more »

hand stacking money coins
Dividend Stocks

6 Percent Dividend Yield? I’m Buying This TSX Passive-Income Stock in Bulk!

Are you looking for a TSX passive-income titan? Here's one stock that pays handsomely that you will regret not buying…

Read more »

Dividend Stocks

Top Canadian Stocks to Buy Now and Hold for a Lifetime in a TFSA

If you want stability in your long-term TFSA, then these four are choices you can pick up again and again.

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Here’s the Average RRSP Balance at Age 54 for Canadians

ETFs like the BMO Canadian Dividend ETF (TSX:ZDV) tend to be good RRSP holdings.

Read more »