The S&P/TSX Capped Energy Index fell nearly 1% on Thursday, May 4. Energy was one of many sectors that suffered a retreat in Thursday’s trading session. Today, I want to focus on a TSX stock that offers great income and consistency for shareholders in this environment. Indeed, this is an energy stock you can trust for the long haul.
Freehold Royalties (TSX:FRU) is a Calgary-based company that is engaged in the acquisition and management of royalty interest in the crude oil, natural gas liquids, and potash properties in Western Canada and the United States. This remains one of my favourite income-yielding equities on the TSX.
How has this TSX stock performed over the past year?
Shares of this TSX stock have dropped 6.4% month over month as of close on May 4. The stock is now down 8.1% so far in 2023. Its shares have plunged 11% year over year. Investors can see more of its recent performance by toggling with the interactive price chart below.
Should investors be pleased with Freehold Royalties’s recent earnings?
This company is expected to release its first quarter (Q1) fiscal 2023 earnings in the first half of this month. Investors got to see Freehold’s final batch of fiscal 2022 earnings on March 1, 2023.
Like its peers, Freehold Royalties has benefited from higher prices in the oil and gas sector. Indeed, Western Canadian Select (WCS) was trading at $47.31/barrel at the time of this writing. The price is down sharply after reaching above the $60/barrel mark. The growing threat of recession may continue to apply downward pressure on oil prices in the months ahead, which could limit the potential for Freehold Royalties in the near term.
In Q4 fiscal 2022, Freehold reported funds from operations (FFO) of $80.0 million or $0.53 per share. That was down marginally from $80.8 million, or $0.54 FFO per share, in Q4 of fiscal 2021. Freehold Royalties reported total production in barrels of oil equivalent per day (boe/d) of 15,041 in Q4 2022 — up from 14,219 boe/d in the previous year.
For the full year, Freehold Royalties delivered FFO of $316 million or $2.10 per share. Meanwhile, it posted total production growth of 19% to 14,101 boe/d. Royalty and other revenue climbed 88% year over year to $393 million, as Freehold benefited from higher production volumes and an improved commodity price climate.
Freehold Royalties: Why I’m buying today!
Freehold Royalties also provided 2023 guidance in its most recent quarterly report. It is projecting average production (boe/d) between 14,500 and 15,500. Meanwhile, it expects total FFO between $250 million and $280 million while also anticipating West Texas Intermediate (WTI) crude price of US$80/barrel. WTI crude sits at US$70/barrel at the time of this writing.
Shares of this TSX stock currently possess an attractive price-to-earnings ratio of 9.9. Better yet, Freehold Royalties offers a monthly distribution of $0.09 per share. That represents a super strong 7.8% yield.
