Freehold Royalties Stock: A Dependable 7.5% Monthly Dividend

Canadian investors hungry for income can trust Freehold Royalties Ltd. (TSX:FRU) stock for its fantastic monthly dividend in 2023.

Ambrose O'Callaghan

Ambrose O'Callaghan graduated with a BA in Political Science from McMaster University. After that, he jumped into the banking world. He worked from the front line to an investment associate role. After that, he found a way to marry his experience and knowledge in the world of banking and finance to his love and passion for writing. Ambrose is a passionate believer in Warren Buffett's value investing model.

Published May 31, 2023 3:15 pm EDT

| More on: FRU

Freehold Royalties (TSX:FRU) is the stock I want to explore in-depth, as we look to close the book on a less-than-stellar month of May in 2023. Instead of lamenting the loss of momentum for the Canadian market, investors should look to take advantage of the current situation. One way to do that could be to switch to an income-oriented strategy. In this case, Freehold Royalties is the perfect stock to help you achieve your goals. Let’s dive in.

How has this monthly dividend stock performed over the past year?

Shares of this monthly dividend stock have dropped 2.1% month over month as of close on May 30. Meanwhile, the stock has fallen 4.8% so far in 2023. Canadian investors who want to see more of its performance can play with the interactive price chart below.

Like its peers, Freehold Royalties has been impacted by fluctuations in oil and gas prices. For example, the price of West Texas Intermediate (WTI) crude is trading under the US$70/barrel mark at the time of this writing. Moreover, Western Canadian Select (WCS) is currently priced under $50/barrel. Regardless, this dividend stock has maintained cash flow to continue to deliver to its shareholders.

Here’s why Freehold Royalties is the ultimate stock for income investors…

This company released its first-quarter (Q1) fiscal 2023 earnings on May 10. Freehold Royalties reported $77 million in revenue and $59 million in funds from operations, or $0.39 per share. Moreover, it reported an average realized price of $56.99 barrels of oil equivalent (boe). Total production in barrels of oil equivalent per day (boe/d) climbed 8% year over year to 14,724.

Freehold Royalties saw dividend declared of $40.7 million or $0.27 per share in Q1 of fiscal 2023. That was up 35% compared to Q1 of fiscal 2022. The company has increased its dividends by a whopping 500% since it was forced to retreat on its monthly payout during the COVID-19 pandemic in 2020. Income investors can feel confident, as its dividends are well covered by its funds generated year on year. That has been a consistent story at this top dividend stock for many years.

Looking ahead, this company is projecting production (boe/d) between 14,500 and 15,500 in 2023. Meanwhile, it projects funds from operations between $230 million and $280 million for the full year. This should encourage investors who will be reliant on the stock’s dividend payout in this summer and beyond.

Freehold Royalties: How its monthly dividend can reward you in 2023!

To demonstrate Freehold Royalties’s attractive income, let’s run a little scenario in an imaginary Tax-Free Savings Account (TFSA). In this newly opened account, we will earmark roughly $10,000 for our monthly income needs.

Freehold Royalties stock closed at $14.35 on Tuesday, May 30. We can purchase 700 shares of this dividend stock for a total price of $10,045. That puts us just above our monthly income budget in the TFSA. Freehold Royalties last announced a monthly distribution of $0.09 per share. That represents a superb 7.5% yield. Our TFSA investment will allow us to churn out tax-free monthly passive income of $63.