Are you looking for ways to earn reliable tax-free passive income without making a lot of effort in Canada? If yes, dividend investing using your TFSA (Tax-Free Savings Account) can help you easily achieve that goal. Among all possible ways to earn tax-free extra monthly income, investing your hard-earned TFSA savings in some quality dividend stocks could be one of the most flexible ones.
In this article, I’ll talk about a trustworthy Canadian dividend stock you can buy now and discuss how it can help you generate tax-free passive income each month for years to come.
A top Canadian dividend stock for tax-free monthly passive income
Whether you want to grow your wealth for early retirement or earn tax-free passive income from dividends, you should always focus on a stock’s financial growth trends and fundamental outlook before investing in it. This principle will allow you to keep your risks low and still expect healthy returns on your investments in the long run.
With that in mind, I find Freehold Royalties (TSX:FRU) attractive to buy now, especially after a recent sharp downside correction in its share prices. This Calgary-headquartered energy sector-focused royalty firm currently has a market cap of $2.1 billion, as its stock trades at $14.22 per share with about 10.2% year-to-date losses. At this market price, Freehold Royalties offers an impressive 7.6% annualized dividend yield and distributes its dividend payouts among investors every month.
Improving financial growth trends
In the last few years, Freehold Royalties has accelerated its expansion and optimization efforts that have boosted its financial growth trends. In 2022, the company’s average production volume inched up by 19% YoY (year over year) to reach a record 14,101 barrels of oil equivalent per day. Higher production and stronger commodity prices drove its yearly revenue to $393 million last year, reflecting an outstanding 88% jump from the previous year. More importantly, its adjusted earnings in 2022 soared 160% YoY to $1.38 per share.
Its strong financial growth trend could be the primary reason why FRU stock managed to deliver a solid 204% positive returns in 2021 in 2022 combined before turning negative earlier this year. It’s important to note that this weakness in its share prices could primarily be attributed to recent declines in the prices of energy products amid fears of slowing global economic growth. However, I expect this negative trend in oil and gas prices to be temporary as global demand continues to surge in the post-pandemic era with growing supply concerns, especially after the Russian invasion of Ukraine.
Given that, the recent declines in Freehold stock could be an opportunity for long-term investors to buy this amazing Canadian monthly dividend stock at a bargain.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Freehold Royalties | $14.22 | 1,000 | $0.09 | $90 | Monthly |
| Prices as of June 5, 2023 |
Bottom line
If you want to make $90 a month, equivalent to $1,080 per year, in tax-free passive income from its dividends, you can simply add 1,000 shares of Freehold Royalties to your TFSA now. You’ll need to invest $14,220 in this energy royalty company to buy these many shares at the current market price. That said, you should always try to diversify your TFSA portfolio to minimize risks.
