Despite a recent spike, the prices of energy products have seen a sharp correction in the last year, taking a toll on investors’ sentiments by triggering a big selloff in energy stocks. Worsening macroeconomic conditions and the possibility of a looming recession have dimmed the short-term demand outlook for energy products, which is the main reason why crude oil and natural gas prices have plunged lately.
Nonetheless, the long-term oil and gas demand outlook remains strong due to growing supply-side concerns, which should help commodities prices and energy stocks recover fast. That’s why it could be the right time for long-term investors to buy some quality energy stocks at a big bargain now. In addition, some energy stocks reward their investors with quality dividends, which can be a source of monthly passive income. Let’s take a closer look at one of the top Canadian dividend stocks from the energy sector that can help you earn handsome passive income each month.
A top dividend stock for monthly passive income
Based on its recent financial growth trends and fundamental outlook, Freehold Royalties (TSX:FRU) could be a trustworthy dividend stock to consider investing in for the long term. This Calgary-headquartered oil and gas-focused royalty firm currently has a market cap of $2.2 billion, as its stock trades at $14.76 per share with about 6.8% year-to-date losses. At the current market price, it offers an attractive 7.3% annualized dividend yield and distributes its dividend payouts every month.
Freehold Royalties set several new records for revenue, funds from operations, and production volume in 2022. Despite a decline in oil and gas prices in the latter half of the year, its overall financial performance was solid as the drilling activity at its assets remained strong. These are some of the key reasons why Freehold managed to register a 90.6% YoY (year-over-year) rise in its total revenue last year to $393 million. Its adjusted annual earnings jumped to $1.30 per share, reflecting an outstanding 160.4% YoY growth.
More importantly, its adjusted net profit margin expanded significantly to 53.2% in 2022 from just 35% in the previous year. These positive factors encouraged Freehold’s management to more than double its dividend payouts on a YoY basis. Despite all these positive factors and its improving fundamental outlook, FRU stock hasn’t seen much appreciation lately, making it look cheap to buy now to hold for years to come.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Freehold Royalties | $14.76 | 8,889 | $0.09 | $800 | Monthly |
| Prices as of Apr. 6, 2023 |
Bottom line
If you want to earn $800 in monthly passive income from Freehold’s consistently increasing dividends, you can buy 8,889 of its shares now. To buy these many shares at the current market price, however, you’ll need to invest about $131,202 in this single stock.
While the example of this monthly dividend stock gives a good idea of how easily you can create a reliable source of passive income, it’s never recommended that you invest such a large sum of money in any single stock, no matter how attractive it looks at the time of investing. Instead, you should diversify your portfolio by including more such quality passive-income stocks to it.
