3 Top Royalty Stocks With Dividend Yields of Up to 7.8%

If you seeking passive income, these three royalty stocks are worth a look.

| More on:
growing plant shoots on stacked coins

Image source: Getty Images

Whether or not you’re into investing, it’s likely you’re already semi-familiar with royalties. Royalties are essentially fees paid for the ongoing use of someone else’s property. This can include everything from books and patents to oil and gas.

So when it comes to royalty stocks, these can provide an interesting investment option. These companies provide upfront capital to mining companies to fund exploration or development projects, especially in the mining sector.

Compared to directly owning a mining company, they have less exposure to the risks associated with operating mines, such as fluctuations in operational costs or mine development issues. So if you’re looking for a safer option from royalty stocks, then I would kick it off with these three.

Freehold Royalties

First, let’s look at Freehold Royalties (TSX:FRU). Freehold concentrates on royalties from already established oil and gas properties, particularly in the Permian Basin of North America. This reduces risk compared to that of companies financing riskier exploration ventures.

Furthermore, these established properties tend to have lower operating costs and predictable production. This translates to a more reliable stream of royalty income for Freehold.

It also means the company has been able to secure a stable dividend. Freehold prioritizes returning a consistent dividend to shareholders, targeting a payout ratio of around 60% of its earnings. This can be attractive for income-oriented investors seeking regular returns. And right now, it offers a substantial 7.8% dividend yield.

Wheaton Precious Metals

Another strong option to consider is Wheaton Precious Metals (TSX:WPM). WPM deals exclusively with precious metals, primarily gold and silver. These commodities tend to hold their value well over time and can even act as a hedge against inflation. When gold and silver prices rise, WPM profits significantly due to their low-cost metal acquisition. This offers significant upside potential for investors.

The company concentrates on securing agreements with established mines with low operating costs and long mine lives. This reduces risk compared to companies financing riskier ventures. WPM provides upfront capital to miners in exchange for the right to buy gold and silver at pre-determined prices, often below market value. This locks in profit margins when they sell the metals at market price.

Now, WPM has a diversified portfolio of streaming agreements across multiple mines, reducing their reliance on the performance of any single operation. And with a solid 1.1% dividend yield, it can be quite attractive for investors.


Finally, Osisko Mining (TSX:OSK) is great for investors seeking more focus on gold from their royalty companies. Unlike some royalty stocks with global reach, Osisko concentrates on royalties from mines in North America, particularly Canada. Canada has a stable political climate and well-established legal system, reducing risks associated with operating in some riskier jurisdictions.

Again, Osisko’s portfolio primarily focuses on gold royalties, offering exposure to a precious metal known for its ability to hold value and potentially act as a hedge against inflation. Osisko holds over 135 royalties, streams, and off-take agreements. This reduces reliance on any single mine’s performance. Notably, they have a significant stake (5% net smelter return) in the Canadian Malartic mine, the largest operating gold mine in Canada.

Finally, Osisko looks to organically grow its asset base by 10 to 12% annually. This can be achieved through strategic acquisitions of new royalties or streams, without the high upfront costs of developing new mines themselves. Now here the company is focused more on growth, so there isn’t a dividend yield currently. But stick around. You could certainly be in for one in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

Dividend Investors: Top Canadian Utility Stocks For June

Here are three of the top Canadian utilities stocks long-term investors may want to consider as portfolio staples moving forward.

Read more »

data analyze research
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Two stocks paying monthly dividends are excellent options for income-focused investors looking to increase their passive-income streams.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Invest $7,000 in This Dividend Stock for $519 in Passive Income

A $7,000 investment in this top dividend stock could generate over $519 annually in passive income.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These three stocks are not only primed to increase their dividends again this year; they are three of the best…

Read more »

Dividend Stocks

Add These 6 Undervalued Stocks to Your TFSA Before Prices Pick Back Up

These six undervalued stocks are perfect for those seeking massive passive income for your TFSA, and prices are about to…

Read more »

Golden crown on a red velvet background
Dividend Stocks

The Dividend Kings: Stocks Every Canadian Investor Should Own

Dividend Kings have the status for a reason. They're stable, growing companies that will provide dividends to investors for decades.

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

2 High-Yield (But Slightly Risky) Stocks to Keep Your Eye On

Income investors may want to keep an eye on two high-yielding stocks but should be conscious about the inherent business…

Read more »

Beware of bad investing advice.
Dividend Stocks

3 No-Brainer Stocks to Buy With $50 Right Now

No-brainer stocks may vary from time to time. Stocks from specific sectors and industries may become no-brainer picks in some…

Read more »