Canadian investors may target a dividend stock for any number of reasons. Equities that pay out consistent income tend to offer more stability than those that offer a shot at big capital growth. The best blue-chip stocks typically offer a balance that even the most conservative investor can rely on. Today, I want to zero in on a dividend stock that offers monthly income.
Freehold Royalties (TSX: FRU) is a Calgary-based company that is engaged in acquiring and managing royalty interest in crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. In this piece, I want to discuss its recent performance and explore why Canadian investors should continue to trust Freehold for the long term. Let’s dive in.
How has this dividend stock performed over the past year?
Shares of Freehold Royalties have jumped 5.8% month over month as of close on Friday, July 28. The dividend stock is still down 5.7% so far in 2023. Its shares are down marginally in the year-over-year period. Investors can see more of its recent performance with the interactive price chart below.
Should investors be happy with Freehold’s recent earnings?
Last week, Freehold Royalties announced that it would reveal its next batch of results on the morning of Monday, July 31. At the time of this writing, we still have not been able to see these earnings. In the first quarter (Q1) of fiscal 2023, Freehold delivered total production growth of 8% to 14,724 barrels of oil equivalent per day (boe/d).
Royalty and other revenue were reported at $76.6 million in Q1 — down from $87.6 million in the previous year. Meanwhile, it delivered $59 million or $0.39 per share in funds from operations (FFO). Freehold reported $41 million in total dividends paid through the quarter. That means that earnings still more than covered its dividend payout.
That earnings coverage has been Freehold’s strong point for investors for many years. It is what makes it one of the best energy stocks for income generation on the TSX. The company did provide guidance for the remainder of 2023. Unfortunately, the ongoing wildfire situation in Alberta is expected to have an impact on its Q2 results. Despite that, it continues to project production between 14,500 and 15,500 boe/d for the rest of the fiscal year. Moreover, Freehold is forecasting FFO between $250 million and $280 million.
Why I’m buying this monthly dividend stock today
Shares of Freehold Royalties currently possess a very favourable price-to-earnings ratio of 10. That puts this energy stock in much more attractive value territory than most its industry peers. It has a phenomenal track record which we have already touched on.
Freehold Royalties last paid out a monthly dividend of $0.09 per share. That represents a very tasty 7.5% yield. This is a dividend stock you can trust for the long haul, and it offers hefty income on top of its dependability.
