For a Shot at $6,500 in Annual Passive Income, Buy 6,020 Shares of This TSX Stock

Freehold Royalties Ltd. (TSX:FRU) is a TSX stock that can deliver big passive income for Canadian investors right now.

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 April 4, 2023 12:00 pm EDT

The establishment of a lucrative passive-income stream is a sought-after milestone for investors young and old. Indeed, this is key to a comfortable retirement. Today, I want to discuss how we can look to generate $6,500 in annual passive income through one dependable TSX stock. Freehold Royalties (TSX: FRU) is the TSX stock I’d like to target today. Let’s jump in.

Here’s why I’m jumping on this TSX stock right now!

Freehold Royalties is a Calgary-based company that is engaged in acquiring and managing royalty interest in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Canadian investors may want to snatch up oil and gas equities, as oil prices have gained nice momentum in the late winter and early spring of 2023.

Shares of this TSX stock have jumped 4.7% week over week as of close on Monday, April 3. That has pushed Freehold Royalties stock into the black in the year-to-date period in 2023. Its shares are up 1.4% year over year. Investors who want more information can look at the interactive price chart below.

Should investors be encouraged by its recent earnings?

This company released its fourth-quarter (Q4) and full-year fiscal 2022 results on March 1, 2023. Freehold Royalties put together a record-setting year, as oil and gas prices surged along with broader inflation rates.

In Q4 2022, Freehold Royalties delivered total production growth of 6% to 15,041 barrels of oil equivalent per day (boe/d). That represented record production for the second quarter in a row. Moreover, it realized a price of $69.76/boe — up 21% compared to Q4 fiscal 2021. Funds from operations (FFO) also rose to $80.0 million, or $0.53 per share, compared to $68.8 million, or $0.46 per share, in the previous year.

For the full year, the company posted royalty and other revenue growth of 88% to $393 million. Meanwhile, it achieved record FFO of $316 million, or $2.10 per share. That makes this TSX stock an enticing pick, even ignoring its passive-income potential.

How this TSX stock can help you take home big annual passive income in 2023 (and beyond)

We are going to look to generate annual passive income of $6,500 with an investment in Freehold Royalties. The current cumulative contribution room in a Tax-Free Savings Account (TFSA) stands at $88,000 in 2023. At its current price, we can make $6,500 in annual passive income almost entirely tax free if we utilize all our hypothetical TFSA room.

It is worth noting that Canadian investors should endeavour to diversify their TFSA investments. However, this hypothetical is worth exploring to demonstrate how much passive income you can rake in with the right moves.

Shares of this TSX stock closed at $15.10 on Monday, April 3. We can snatch up 6,020 shares of Freehold Royalties for a purchase price of $90,902. Freehold Royalties offers a monthly distribution of $0.09 per share. That represents a very tasty 7.1% yield. This investment will allow us to generate monthly passive income of $541.80 at the time of this writing. That works out to annual passive income of $6,501.80.