This Stock Yields 5.9% and Pays Out Each Month

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%.

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.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTDIV$4.831,449$0.29$420.21Monthly$6,998.67

For patient income seekers, that combination could make it one of the more interesting monthly dividend stocks on the TSX today.

The post This Stock Yields 5.9% and Pays Out Each Month appeared first on The Motley Fool Canada.

Should you invest $1,000 in Diversified Royalty right now?

Before you buy stock in Diversified Royalty, consider this:

The Motley Fool Canada team has identified what they believe are the top 10 TSX stocks for 2026… and Diversified Royalty wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have over $18,000!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 94%* – a market-crushing outperformance compared to 85%* for the S&P/TSX Composite Index. Don’t miss out on our top 10 stocks, available when you join our mailing list!

Get the 10 stocks instantly #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of April 20th, 2026

More reading

• How to Use Just $20,000 to Turn Your TFSA Into a Reliable Cash-Generating Machine
• Beyond Telus: A High-Yield Stock Perfect for Income Lovers
• A Dependable Monthly Dividend Stock With a 6.6% Yield

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.