With interest rates still up there, a lot of investors are looking for ways to get a reliable monthly income. One interesting option on the TSX is Freehold Royalties (TSX:FRU). It offers an attractive combination of a high yield and getting paid every month. That’s like a regular cheque coming in! So let’s look at why it might be a strong option.
The stock
Freehold Royalties is a company based in Calgary that specializes in oil and gas royalties. Now, here’s the interesting part: unlike most energy companies, Freehold doesn’t actually drill any wells or manage any of the operations. Instead, it makes money by collecting royalty payments from other companies pulling oil and gas out of land that Freehold owns the rights to. This business model gives Freehold a pretty steady income stream without having to worry about all the risks and costs of running the actual drilling operations. It’s like being the landlord and collecting rent without having to fix the leaky faucets yourself!
As of writing, Freehold Royalties is offering a monthly dividend yield of around 9.3%. That’s a pretty high yield, especially when interest rates are also high. It means investors are getting a good chunk of cash back on their investment regularly. This monthly payout schedule is particularly appealing for those who are looking for a consistent income to help with their monthly expenses. It’s like getting a mini paycheque every month from your investments.
Looking at Freehold Royalties’ finances, the TSX stock has shown it can handle different economic conditions. In its latest earnings report, it reported stable revenue and kept its dividend payments steady. This reflects the strength of its business model. Because it’s only collecting royalties, its income is more predictable. Plus, Freehold has a diverse collection of royalty interests spread across different regions and operated by various companies. This diversification helps to make its income even more stable. It’s like not putting all your eggs in one basket.
Why it works
If you’re an investor who’s looking for a dependable monthly income in a world where interest rates are still a bit high, Freehold Royalties looks like a pretty compelling option. Its unique way of doing business in the oil and gas sector, high yield, and consistent monthly dividend payments make it something worth considering for those who are focused on generating regular income from their investments. It’s like finding a reliable source of cash flow in a sometimes unpredictable market.
Freehold’s business model also means it has lower operational risks compared to companies that are directly involved in drilling and production. It doesn’t have to worry about things like drilling costs, equipment maintenance, or environmental liabilities in the same way. This can make its income stream more secure over the long term. The fact that its royalties come from various operators also reduces the risk of relying too heavily on the success of a single company. If one operator has a temporary setback, Freehold’s overall income is less likely to be affected.
The demand for oil and gas, while subject to fluctuations, generally provides a consistent base for royalty income. Freehold’s long-term strategy involves actively managing its royalty portfolio to maximize returns and ensure a sustainable income stream for its investors. This can include acquiring new royalty interests and optimizing its existing holdings. The TSX stock’s management team has experience in the oil and gas sector and a track record of delivering value to shareholders through consistent dividend payments.
Bottom line
For Canadian investors looking for income, Freehold’s monthly payouts can be particularly attractive for planning and managing cash flow. The company’s relatively straightforward business model can also make it easier for investors to understand compared to more complex energy companies. While the price of oil and gas can influence Freehold’s royalty income, its diversified portfolio and the fact that it doesn’t bear the direct operational costs provide a degree of insulation against price volatility. Overall, Freehold Royalties presents itself as a stable and income-generating investment option within the Canadian energy landscape.