Achi news desk-
Inflation is a hurdle for consumers, but not for Tax Free Savings Account (TFSA) consumers. Due to high inflation in 2022 and 2023, the annual contribution limits were indexed to inflation and increased by $500 to $6,500 and $7,000, respectively.
TFSA contributions seem small but are powerful in a tax-advantaged investment account like the TFSA. In addition to maximizing the new contribution limit, experienced TFSA users will invest wisely. You can maximize your $7,000 with A diversified Royal Corporation (TSX: DIV) a Sugar Rogers (TSX: RSI).
They are cheap stocks because the combined share price is less than $10. However, both dividend stocks are reliable in terms of dividend yield and payout consistency. All earnings and dividend income in your TFSA are tax-exempt.
Fully recovered from the pandemic
Diversified Royalty collects predictable royalty streams from established multi-location businesses and franchisors. This $456 million multi-royalty corporation has eight royalty partners. Air Miles, Nurse Next Door, Mr. Mikes, Oxford Learning, Sutton, Stratus, and Bar Burrito join Mr. Lube in the royalty pool.
At $2.77 per share, current investors enjoy a year-to-date return of 4.45% and participate in the lucrative dividend yield of 9.02%. If you go all in, your $7,000 can buy 2,527 shares and generate $52.62 in tax-free passive income each month. The payment frequency of this industrial stock is monthly.
In 2023, revenue increased 25% to $56.5 million versus 2022, while net income jumped 103.9% year over year to $31.7 million. The top and bottom lines were both record results. Mr. Lube + Tires accounted for 46.1% of adjusted revenue.
The acquisition of the BarBurrito Restaurants trademark, the eighth royalty partner, was completed in October 2023. Management added that Mr. Lube + Tyres, Oxford, and Mr Mikes have achieved their best ever results and are in a position to grow in 2024. Sean Morrison, President and CEO of DIV, added that Q4 2023 was another record quarter and the best quarter ever the royalty company in adjusted revenue.
DIV had losses in 2020 but has fully recovered from the global pandemic. Only the royalty income from AIR MILES is decreasing, although the trend could soon reverse as the business stabilizes. Meanwhile, DIV plans to look for potential transactions in the Canadian and US markets this year.
The team will focus on educating potential US royalty partners about the unique trademark and royalty structure. DIV had losses in 2020 but has fully recovered from the global pandemic.
Solid fundamentals
Rogers Sugar can be a stand-alone investment or supplement Diversified Royalty for diversification purposes. This user staples stock trades at $5.19 per share and pays a generous 6.94% dividend. Moreover, the stock rarely experiences wild price swings.
The $663.9 million company is the largest refined sugar distributor in Canada. It also produces premium quality higher edge maple syrup. In Q1 2024, revenue increased 10.4% to $288.7 million compared to Q1 2023, while net earnings decreased 5.6% year over year to $13.8 million.
Its President and CEO, Mike Walton, expects better financial results in the coming quarters following the end of a labor dispute at the Vancouver refinery.
Reliable income providers
Diversified Royalty and Rogers Sugar are reliable income providers. The former is doing particularly well post-pandemic, while the latter maintains solid fundamentals.
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