Buy 698 Shares of This Top Dividend Stock for $62.82/Month in Passive Income

This monthly dividend payer is a way to bring in dividend income, with cash coming from multiple business ventures.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 9, 2024 7:30 am EDT

| More on: FRU

Are you looking for passive income? A royalty company can be a fantastic way to secure long-lasting monthly dividends. It earns a cut of revenue from other businesses without the need for heavy operational costs. Essentially, it sits back and collects a slice of the profits from various industries, like mining or energy, while letting the companies do the hard work. This business model means steady cash flow, even in tough times, thereby making those monthly payouts more reliable and potentially growing over time. It’s like having slices of multiple pies without baking any!

Sliced pumpkin pie — Source: Getty Images

One to consider

Freehold Royalties (TSX:FRU) collects passive income from energy projects without getting its hands dirty. Instead of actually drilling for oil and gas, it owns land (or rights to it), and energy companies pay Freehold for the privilege of extracting resources. It’s a pretty sweet deal. While others take on the heavy lifting and operational risks, Freehold sits back and collects royalties. And because it’s diversified across a lot of properties, it’s not putting all its eggs in one basket, making it more resilient.

What’s even better is that Freehold focuses on maintaining a strong balance sheet and keeping debt low. That way, it can pass on the rewards to its shareholders in the form of steady dividends. Plus, it’s always looking to add new land or rights, which keeps the royalty stream flowing and growing. For income-focused investors, especially those who love seeing monthly dividends, Freehold Royalties can feel like a smooth ride toward long-term returns with a lower level of risk.

Freehold’s business performance

Freehold has been performing quite well, as evidenced by its latest quarterly earnings. With quarterly earnings growth year over year up by 62% and quarterly revenue growth of 14.6%, the company is showing strong momentum. Freehold’s business model of collecting royalties from energy companies continues to generate significant profit margins, with an impressive 46.41% profit margin and a 61.73% operating margin. These metrics highlight the efficiency of the company’s business model.

On the value front, Freehold is offering a dividend yield of 7.61%, which is quite attractive for income investors. The payout ratio of 108% shows that the company is distributing most of its earnings, signalling a commitment to returning cash to shareholders. While its debt-to-equity ratio of 24.83% is manageable, it’s important to note its strong current ratio of 2.05, showing it has enough liquidity to cover short-term obligations. With a price-to-earnings ratio of 14.2, Freehold remains reasonably valued in the market, making it a compelling option for those seeking both solid dividend income and exposure to the energy sector.

Bottom line

Let’s say you’re looking to just get some strong dividends from Freehold. Excluding what you might get in returns, this is what you could earn from an investment of $10,000.