Diversified Royalty Corp: Strong Director Backing and Diversified Royalties Underpin Dividend Resilience Amid Economic Uncertainty

Diversified Royalty Corp (DIV.TO) has emerged from its 2025 Annual General Meeting (AGM) with a clear message of shareholder confidence, as directors secured overwhelmingly high vote-for percentages—over 90% for six of seven nominees, including Sherry McNeil, who garnered 99.48% support. This robust mandate underscores investor trust in the board's ability to navigate macroeconomic risks while sustaining the company's hallmark monthly dividends.

The AGM results come amid a 10% dividend hike to CAD 0.275 per share annually, effective July 1, 2025—a move signaling confidence in cash flow resilience. For over 18 years, DIV has delivered uninterrupted monthly dividends, a streak bolstered by its diversified portfolio of royalty streams, including iconic brands like AIR MILES® and Mr. Lube + Tires.

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The recent acquisition of Cheba Hut's trademarks for USD 36 million adds further stability. The deal, funded via existing cash and credit facilities, expands DIV's U.S. footprint and secures a royalty stream growing at 3.5% annually or U.S. CPI + 1.5%, whichever is higher. With Cheba Hut's 2024 system sales of USD 149 million and projected 2025 growth to USD 187 million, this acquisition contributes 7% to pro-forma adjusted revenue while enhancing tax efficiency through CAD 51 million in new tax pools.

Crucially, DIV's debt management avoids equity dilution. A CAD 70 million amended acquisition facility and extended maturities ensure low amortization, preserving cash flow flexibility. This contrasts with peers relying on equity raises during market downturns, making DIV's debt-to-EBITDA ratio a key metric to monitor. .

While risks remain—including franchise performance and inflationary pressures—the board's focus on accretive acquisitions and “cash flow per share growth” aligns with its dividend-centric strategy. The Cheba Hut deal exemplifies this: its royalty structure insulates DIV from operational risks while benefiting from franchisor growth.

For income-focused investors, DIV's historical dividend consistency (up 35% since 2015) and fortress balance sheet justify its status as a defensive play. Despite macroeconomic uncertainties, the AGM's voting results and dividend hike suggest shareholders view DIV as a recession-resistant income generator.

Investment Takeaway: Diversified Royalty Corp's strong director support, diversified revenue streams, and disciplined capital management position it as a compelling buy for investors seeking stable, inflation-protected dividends. Monitor dividend coverage ratios and royalty partner performance for sustainability signals, but for now, DIV remains a top-tier income stock.