To supplement your Canada Pension Plan (CPP) and Old Age Security (OAS) payouts, you might already be drawing from a Tax-Free Savings Account (TFSA) or a Registered Retirement Income Fund (RRIF).
However, one challenge with traditional Canadian dividend stocks, like those in the banking and pipeline sectors, is that they typically distribute dividends quarterly.
While these can be great investments, if you need passive income more frequently, you might find yourself having to sell shares to maintain cash flow, which is not an ideal situation.
A fantastic solution to this problem is investing in royalty trusts. These are companies that own an interest in cash flow-producing assets and distribute the profits to shareholders, often on a monthly basis.
Here are my three favourite royalty trusts that focus on restaurants you’re likely familiar with and might even frequently visit as a Canadian.
A&W
First up is A&W Revenue Royalties Income Fund (TSX: AW.UN), which operates by collecting a percentage of the gross sales from A&W restaurants across Canada.
Essentially, as an investor, you’re earning revenue directly from the top-line sales generated by 1,054 fast-food franchises nationwide.
The current forward annual dividend yield for AW.UN stands at 6.62%. This yield is computed by taking the most recent dividend payment, annualizing it by multiplying it by 12, and then dividing it by the fund’s current share price.
For example, if you own $10,000 worth of shares in this fund, you would expect to receive about $660.20 in dividends over the course of a year at the current rate, assuming the dividend and share price remain constant.
Boston Pizza
If you’re interested in a more upscale dining and investment option, consider the Boston Pizza Royalties Income Fund (TSX: BPF.UN).
This restaurant chain has been a fixture in Canada since 1964, with a significant presence in major metropolitan areas across the country.
Known for its family-friendly dining and vibrant sports bar atmosphere, Boston Pizza has cultivated a loyal customer base over the decades.
BPF.UN offers an even more attractive forward annual dividend yield compared to AW.UN, currently sitting at 8.61%.
The Keg
The most upscale option among restaurant-focused royalty trusts is The Keg Royalties Income Trust (TSX: KEG.UN).
The trust was established in May 2002 when it acquired the Keg trademarks from the restaurant company, securing an exclusive license to use these trademarks for 99 years.
Additionally, the trust receives a monthly royalty payment equivalent to 4% of the gross revenue from Keg restaurants across the U.S. and Canada.
Owning shares in KEG.UN means that every time someone dines at a Keg restaurant, a portion of their bill contributes directly to your investment returns.
It’s a prime example of owning a productive enterprise where you benefit financially from the ongoing business activities. Currently, KEG.UN offers an attractive forward annual dividend yield of 8.03%.
