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Diversified Royalty Corp Delivers Strong Q2 FY 2025 with 9.3% YOY Cash Growth

Diversified Royalty's Q2 FY 2025 was marked by impressive growth across key segments. The company's annualized distributable cash surged by 9.3% YOY, driven by expanded franchise growth and higher same-store sales.

In this image there is a super market, in that super market there are groceries.
In this image there is a super market, in that super market there are groceries.

Diversified Royalty Corp Delivers Strong Q2 FY 2025 with 9.3% YOY Cash Growth

Diversified Royalty Corp (TSX:DIV.CA) has reported a robust quarter, with strong performance across key segments and a notable increase in annualized distributable cash. The company maintained its quarterly dividend at $0.0625 per share, comfortably covered by its cash flow.

The company's best performing segments in Q2 FY 2025 were Mr. Lube + Tires, Oxford Learning, and Stratus, with royalty income growth of 10.8%, 5.7%, and 6.1% respectively. Diversified Royalty's annualized distributable cash in the quarter rose by 9.3% year-over-year to $12.7 million. Notably, the royalty stream from Cheba Hut is projected to increase by 25% year-over-year, which would cover the previous royalty increase by 133%.

The company's weighted average organic royalty growth in the quarter accelerated to 5.5% year-over-year, up from 4.2% in the same period last year. This growth was driven by expanded franchise growth and higher same-store sales, particularly from Cheba Hut, which brought in $214,000 in royalty income for the quarter.

Despite strong restaurant spending in Canada, Pizza Pizza (TSX:PZA.CA) and Boston Pizza (OTC:BPZZF) have seen a slowdown since August. However, Diversified Royalty's stock has outperformed both the S&P and the TSX since the last article, delivering a total return of ~15.7%.

Diversified Royalty's strong quarterly performance, driven by robust growth across key segments and a significant increase in annualized distributable cash, positions the company well for future growth. The company's dividend, payout at $0.275 per share with a discount rate around 7.5%, is expected to remain stable, although long-term growth is likely. The Cheba Hut deal brings a continuous 50-year royalty flow with minimum adjustments, further securing the company's future cash flow.

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