Are you looking for passive income? A royalty company can be a fantastic way to secure long-lasting monthly dividends. It earns a cut of revenue from other businesses without the need for heavy operational costs. Essentially, it sits back and collects a slice of the profits from various industries, like mining or energy, while letting the companies do the hard work. This business model means steady cash flow, even in tough times, thereby making those monthly payouts more reliable and potentially growing over time. It’s like having slices of multiple pies without baking any!
One to consider
Freehold Royalties (TSX:FRU) collects passive income from energy projects without getting its hands dirty. Instead of actually drilling for oil and gas, it owns land (or rights to it), and energy companies pay Freehold for the privilege of extracting resources. It’s a pretty sweet deal. While others take on the heavy lifting and operational risks, Freehold sits back and collects royalties. And because it’s diversified across a lot of properties, it’s not putting all its eggs in one basket, making it more resilient.
What’s even better is that Freehold focuses on maintaining a strong balance sheet and keeping debt low. That way, it can pass on the rewards to its shareholders in the form of steady dividends. Plus, it’s always looking to add new land or rights, which keeps the royalty stream flowing and growing. For income-focused investors, especially those who love seeing monthly dividends, Freehold Royalties can feel like a smooth ride toward long-term returns with a lower level of risk.
Freehold’s business performance
Freehold has been performing quite well, as evidenced by its latest quarterly earnings. With quarterly earnings growth year over year up by 62% and quarterly revenue growth of 14.6%, the company is showing strong momentum. Freehold’s business model of collecting royalties from energy companies continues to generate significant profit margins, with an impressive 46.41% profit margin and a 61.73% operating margin. These metrics highlight the efficiency of the company’s business model.
On the value front, Freehold is offering a dividend yield of 7.61%, which is quite attractive for income investors. The payout ratio of 108% shows that the company is distributing most of its earnings, signalling a commitment to returning cash to shareholders. While its debt-to-equity ratio of 24.83% is manageable, it’s important to note its strong current ratio of 2.05, showing it has enough liquidity to cover short-term obligations. With a price-to-earnings ratio of 14.2, Freehold remains reasonably valued in the market, making it a compelling option for those seeking both solid dividend income and exposure to the energy sector.
Bottom line
Let’s say you’re looking to just get some strong dividends from Freehold. Excluding what you might get in returns, this is what you could earn from an investment of $10,000.
| RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | TOTAL PAYOUT |
| $14.32 | 698 | $1.08 | $753.84 |
So, by buying 698 shares with that $10,000 investment, you could bring in $753.84 each year, coming to $62.82 each and every month.
