Written by Christopher Liew, CFA at The Motley Fool Canada
Price-conscious investors can still earn big or derive outsized gains by investing in price-friendly stocks. Diversified Royalty (TSX:DIV) and Tamarack Valley Energy (TSX:TVE) or Crew Energy (TSX:CR) won’t dent your budget because all three trade under $5 per share.
The multi-royalty corporation pays a generous 7.27% dividend, while the energy stocks have explosive returns thus far in 2021. If you buy them now, your income or windfall next year would be considerable.
Recovering from the downturn
Diversified Royalty trades at only $2.80 per share. If you plan to maximize your Tax-Free Savings Account (TFSA) limit for 2022, your $6,000 can buy nearly 2,143 shares of the royalty stock. Your money will produce $436.20 in tax-free passive income.
The $347.19 million company owns the trademarks to six, well-established businesses in North America. AIR Miles, Mr. Lube, Mr. Mikes, Sutton, Nurse Next Door, and Oxford Learning Centre are the royalty partners. The royalty streams from these top franchisors were consistent until the global pandemic struck in 2020.
However, the businesses have shown resiliency and are gradually recovering from the economic downturn. In the nine months ended September 30, 2021, DIV’s royalty income increased 20.39% to $30.32 million versus the same period in 2020. Net income hit $15.28 million compared to the $9.73 million net loss compared to the prior year period.
For the first three quarters in 2021, the company generated $3.1 million in cash from operating activities and paid a total of $18.5 million in dividends.