Is your active or regular income sometimes insufficient to cover necessary expenses and others? Fortunately, there’s a way to boost monthly income and avoid financial dislocation or living from paycheck to paycheck. Consider dividend investing if you have idle or free cash to spare.
The Toronto Stock Exchange (TSX) has plenty of dividend-paying stocks that deliver income streams if you need them. Freehold Royalties (TSX: FRU) and Atrium Mortgage Investment Corporation (TSX: AI) are sound choices today and even pay monthly dividends.
With an average dividend yield of 8.08%, a combined investment of $10,000 ($5,000 each) will generate $67.33 in monthly passive income. The amount should keep growing as you increase your positions over time.
Lower-risk returns
Freehold Royalties is a dividend heavyweight in the energy sector, but it is not an oil producer. The $2.18 billion company provides investors with lower-risk returns and stable dividends by collecting royalties from its oil & gas properties and mineral titles in North America. At $14.48 per share, you can feast on the 7.46% dividend yield.
In the third quarter (Q3) of 2023, royalty and other revenue decreased 14.4% to $84.2 million, while net income fell 33% to $42.3 million versus Q3 2022. Notably, net debt thinned 33% year over year to $106.6 million. The quarter’s silver lining was the record production of 5,427 barrels of oil equivalent per day (boe/d) in the United States.
“The third quarter marked another strong period for Freehold as the Company was able to execute on the core aspects of its North American strategy,” said David M. Spyker, Freehold’s president and chief executive officer (CEO). He added that the current dividend is well-funded because of the high margin in the North American royalty portfolio.
Other milestones were 24 new leases with 13 counterparties and a record 102 leases signed through Q3 2023. According to management, the simple business model remains a royalty advantage. Besides the long-duration asset class, Freehold has no development or capital expense and incurs zero operating costs.
Around 360 industry players or drillers pay royalties on the royalty land. Management is confident Freehold can reduce debt at current commodity price levels. The company can also pursue acquisition opportunities with free funds over and above current dividend levels.
A different kind of AI
The ticker for non-bank lender Atrium Mortgage is AI, but it has no reference to artificial intelligence. This $454.5 million mortgage investment corporation provides financing solutions to the commercial real estate and development communities. It focuses on major urban centres, particularly Ontario and Western Canada.
Rapidly rising interest rates are a bane to the real estate sector, yet Atrium Mortgage displays stable earnings. In the first three quarters of 2023, revenue and net income rose 31.6% and 19.7% year over year to $72.66 million and $39.63 million. Also, the nine months’ earnings per share of $0.91 is 18% higher than last year’s record results.
“While elevated interest rates, persistent inflation, and a slowing economy are definitely adding pressure on real estate markets, our management team is experienced at navigating through market cycles,” said Rob Goodall, Atrium’s CEO. At only $10.35 per share, it’s hard to pass up on AI’s mouth-watering 8.7% dividend yield.
Impressive track records
Freehold and Atrium have impressive dividend track records. The former hasn’t missed a monthly payment since April 30, 1998, while the latter hasn’t missed a payment since 2013.
