Canadian royalty stocks are a bit different from the other stocks on the TSX today that you’re used to. Rather than generating earnings to deliver goods and create income through business operations, royalties don’t really provide exposure to daily operations. Instead, a royalty takes a percentage of income no matter what goes on.
This creates a far less volatile instance for investors. Did food prices go up? You still get the same chunk of change. Have costs gone up? Is rent is higher? If anything happens like this, it doesn’t matter; your payout remains the same.
But not all royalty companies provide a superior dividend yield. Today, I’m going to go over the two that are the best Canadian royalty stocks in my books with yields over 5%.
Freehold Royalties
Freehold Royalties (TSX:FRU) is an oil and gas royalty company. The company has interests in oil, gas, and potash with about 15,000 wells and royalty from about 350 industry operators across North America.
Freehold stock is one of the royalty stocks that dishes out dividends on a monthly basis. Right now, the company offers up a dividend yield at 6.88% as well! This comes to $1.08 per share annually.
The company also trades within value territory at the moment, trading at just 11.78 times earnings, with share up 14.79% in the last year alone. This provides you with some protection as well during this poor economic environment, as you can look forward to stable growth and income.
If you’re interested in Freehold stock, here is what you could create in passive income by investing $10,000 on the TSX today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND (ANNUAL) | TOTAL PAYOUT (ANNUAL) | FREQUENCY |
| FRU | $16.02 | 624 | $1.08 | $673.92 | Monthly |
A&W Revenue Royalties Income Fund
Another strong option among Canadian royalty stocks is the A&W Revenue Royalties Income Fund (TSX:AW.UN). A&W stock has long been a strong choice, generating royalties from the use of its trade mark across restaurants in Canada.
The company is similar to Freehold stock in the fact that it also hands out dividends month after month. You can bring in a dividend yield of 5.07% as of writing, which comes in at $1.92 per share annually.
A&W stock is just shy of value territory at the moment, as it trades at 17.37 times earnings. There is good reason for this, however, as the company remains at the same price as it did a year before. While this isn’t as good as Freehold stock, it continues to outperform the TSX today.
If you’re interested in holding A&W stock, then here is what kind of passive income you could be collecting from a $10,000 investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND (ANNUAL) | TOTAL PAYOUT (ANNUAL) | FREQUENCY |
| AW.UN | $37 | 270 | $1.92 | $518.40 | Monthly |
Bottom line
Both of these royalty stocks are strong options for those seeking less volatility during the next few months. You can collect passive income on a monthly basis and look forward to your shares continuing to outperform the TSX today. What’s more, these will prove solid long-term holds you can use to reinvest in them again and again.
