A $1,000 monthly dividend that is immediately reinvested will begin generating additional income the following month. Over time, that accelerated compounding creates meaningful wealth.
Pizza Pizza Royalty (TSX:PZA) is an example of this approach. At $16.59 per share with a monthly dividend of $0.078, 1,000 shares generate $78 monthly passive income or $936 per year. That’s a 5.6% return, paid out in twelve installments instead of four, giving investors maximum flexibility to reinvest or spend as needed.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pizza Pizza Royalty | $16.59 | 1,000 | $0.078 | $78 | Monthly |
How the royalty model works
Pizza Pizza Royalty works differently than traditional restaurant stocks. The company does not own or operate pizza locations. Instead, it collects monthly royalty payments from Pizza Pizza Limited based on system sales from restaurants in the royalty pool.
CFO Christine D’Sylva explained the structure during the Q3 earnings call: “In exchange for using the Pizza Pizza and Pizza 73 trademarks in its restaurant operations, Pizza Pizza Limited will pay the partnership a monthly royalty as a percentage of revenue from the Royalty Pool.”
That percentage-based model creates a direct link between restaurant performance and dividend payments. As system sales grow, royalty income increases, supporting dividend stability and potential increases.
The royalty pool currently includes 794 restaurants – 694 Pizza Pizza locations and 100 Pizza 73 restaurants. That base was expanded by 20 restaurants on January 1, 2025, resulting in immediate revenue growth.
The third quarter results show resilience
Pizza Pizza’s third quarter performance demonstrated the sustainability of its business model during economic downturns. Same-store sales rose 0.1% for the quarter, with Pizza Pizza locations growing 0.3%, while Pizza 73 fell 1.1%.
COO Philip Goudreau acknowledged the challenges: “We saw an overall decline in transactions as we faced increased competition and we saw the impact of lower consumer spending, especially earlier in the July quarter.”
Poor conditions in July affected outdoor events, while tourism to Alberta destinations such as Banff fell due to fewer U.S. visitors. A strike at Canada Post forced the company to skip flyer distribution in July, further depressing sales.
Despite the headwinds, royalty pool system revenue rose 2% to $158.8 million, compared to $155.8 million year-over-year. The combination of new restaurants joined the pool, while modest same-store sales growth lifted royalty income 1.9% to $10.2 million.
Innovation keeps customers coming back
Pizza Pizza is not sitting still waiting for economic conditions to improve.
- The company introduced chicken tenders at Pizza Pizza and new wing flavors at Pizza 73, capitalizing on growing consumer interest in fried chicken products.
- These additions provide stackable individual options while leveraging the company’s “well-known and loved range of dips,” Goudreau said.
- Pizza Pizza has introduced visual delivery tracking, similar to third-party platforms, to improve the customer experience while keeping orders in-house and driving more profitable organic channel growth.
- One of the bright spots of the quarter came from organic delivery growth – the second consecutive quarter of improvement in that channel.
Third-party delivery platforms charge high commissions, which puts pressure on franchisees’ economics. By improving its own ordering experience and integrating third-party features like delivery tracking, Pizza Pizza ensures more orders flow through higher-margin channels.
The shift to pickup continues to accelerate. At Pizza 73, the takeout mix increased from a historical 10% to nearly 25% as customers look for ways to save money.
Financial health supports dividends
The sustainability of the dividend depends on cash flow coverage.
Pizza Pizza declared a shareholder dividend of $5.7 million for the third quarter, or $0.2325 per share per month, unchanged from the prior year. The payout ratio was 111% this quarter, but the company is targeting around 100% annually.
Pizza Pizza ended the third quarter with a total of 811 locations, including non-traditional units. While growth slowed from historical levels, management expects to accelerate traditional network expansion by 2% to 3% for the full year. International expansion in Mexico is still in its early stages, with four locations in Guadalajara.
The 5.6% monthly return provides flexibility to reinvest or supplement living expenses. The royalty model protects investors from operational issues while maintaining exposure to revenue growth.
#Buy #shares #dividend #stock #create #78month #passive #income