Create the Perfect July TFSA with a 6.2% Monthly Payout

A monthly dividend inside your Tax-Free Savings Account (TFSA) can make investing feel less like waiting and more like getting paid. But the catch is that the company still needs to earn enough cash to keep those payments coming. That is why I find Diversified Royalty (TSX:DIV) interesting.

Its monthly income is not tied to one restaurant chain, one service business, or one consumer trend. It comes from a collection of brands that includes automotive services, education, home care, cleaning, restaurants, and real estate. The company has also moved beyond simply owning royalty streams by acquiring the Mr. Lube + Tires franchisor business in Canada. That shift gives it another path to grow in the long run.

In this article, let’s unpack why this monthly dividend stock could be a great addition to your TFSA this July.

A diversified monthly income stock to buy in July

To put it simply, Diversified Royalty acquires royalty streams from well-established multi-location businesses and franchisors across North America. As the name suggests, its diversified portfolio includes brands such as Mr. Lube + Tires, AIR MILES, BarBurrito, Oxford Learning Centres, Nurse Next Door, and Stratus Building Solutions. Rather than depending on one industry, the company earns royalties from businesses operating across several sectors, helping diversify its cash flow.

DIV stock currently trades at $4.62 per share with a market cap of about $866 million. Even after climbing roughly 24% so far in 2026 and more than 41% over the last year, it still offers an attractive annualized dividend yield of about 6.2% through monthly payouts.

While its shares have pulled back slightly over the last month, they remain only about 7% below their 52-week high.

Growth supporting the dividend

In the first quarter of 2026, Diversified Royalty’s adjusted revenue jumped 11% year-over-year (YoY) to $18.8 million, driven by growth at Mr. Lube + Tires and Oxford Learning Centres, higher AIR MILES royalties, and contributions from BarBurrito and Cheba Hut.

At the same time, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also rose 11.2% YoY to $17.7 million, while the company’s trailing 12-month adjusted EBITDA has grown more than 14%. Last quarter, Diversified Royalty’s distributable cash, an important measure for dividend investors, also climbed 10.4% YoY to $12 million.

However, its adjusted net profit declined 5.4% from a year ago to $7.6 million, as higher administrative, financing, interest, and share-based compensation costs weighed on earnings despite stronger revenue.

More growth could still be ahead

In April, Diversified Royalty acquired an additional annualized royalty from Cheba Hut worth US$0.9 million. Earlier in March, it expanded the BarBurrito royalty pool by adding nine eligible restaurants. The company also completed its acquisition of the Mr. Lube + Tires franchisor business in June, giving it direct exposure to one of Canada’s largest automotive service franchise networks while creating another long-term growth opportunity.

More recently, Diversified Royalty completed a $57.5 million bought-deal financing. The firm plans to use these proceeds primarily to repay acquisition-related debt tied to the Mr. Lube + Tires purchase while also supporting general corporate purposes. Lower debt could give it additional financial flexibility as the company continues expanding.

Overall, a diversified royalty portfolio, growing cash flow, and a monthly dividend yielding about 6.2% make Diversified Royalty an attractive Canadian stock for TFSA investors seeking dependable income and long-term growth potential.

The post Create the Perfect July TFSA with a 6.2% Monthly Payout appeared first on The Motley Fool Canada.

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Fool contributor Jitendra Parashar 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.