When interest rates rise and inflation bites into your savings, passive income starts looking more attractive than ever. That’s especially true when you find a dividend stock that isn’t just reliable but pays out so much it feels like it’s handing you cash every month. One of the best examples right now is Freehold Royalties (TSX:FRU). With an eye-popping dividend yield of 8.7% and a business model designed for steady cash flow, this energy titan isn’t just rewarding shareholders, it’s practically giving money away.
About Freehold
Freehold isn’t a typical oil and gas company. It doesn’t drill wells or operate expensive rigs. Instead, it owns royalty lands across Canada and the United States. That means it collects a cut from every barrel of oil and every cubic foot of natural gas produced on its land, regardless of who’s doing the work. The benefit is clear: consistent revenue with fewer costs, less debt, and lower capital spending.
The numbers speak for themselves. Freehold’s stock trades around $12.48 at writing. With a monthly dividend of $0.09 per share, that adds up to $1.08 annually. In an era where many blue-chip dividend stocks are paying 4% or less, that kind of return is hard to ignore. And because Freehold pays dividends monthly, investors get consistent cash flow throughout the year.
Will it last?
Now, the big question when it comes to high-yield stocks is always this: can it keep paying? So far, Freehold has shown that it can. In its latest earnings report, the dividend stock posted revenue of $85.4 million for the first quarter of 2025 and net income of $51.1 million. Funds from operations hit $68.1 million, or $0.42 per share. It’s not just sustainable, it’s thriving. Average production came in at 16,248 barrels of oil equivalent per day, a 10% increase from the same time last year, thanks to more drilling activity across its U.S. assets.
Freehold is also financially healthy. It has minimal debt and plenty of cash coming in. The important part is cash generation, and Freehold is producing more than enough to support the dividend. It also helps that gross margins are sky-high. Because Freehold doesn’t operate the wells itself, its gross profit margin was over 96% last quarter. That means nearly every dollar it earns drops straight to the bottom line.
Considerations
Let’s not forget the big picture. Energy prices might be volatile, but the demand for oil and gas remains strong. Even with renewables growing, the world isn’t shifting away from fossil fuels overnight. That gives Freehold a stable runway for the years ahead. As long as producers are drilling, it’s collecting a cut. And if oil prices climb, those royalty cheques get even bigger.
There’s always risk, of course. Energy stocks can swing with commodity prices. If oil drops sharply, royalty revenue could fall. But Freehold has already accounted for that. In fact, management has stated it can still maintain its dividend even if oil falls below US$50 a barrel. That kind of confidence is worth noting.
Bottom line
For investors focused on income, Freehold fits right into practically any portfolio. In fact, here’s what investors could gain from a $10,000 investment from dividends alone!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | INVESTMENT TOTAL |
|---|---|---|---|---|---|---|
| FRU | $12.30 | 1,138 | $1.08 | $1,229.04 | Monthly | $13,997.40 |
At a time when many investors are hunting for yield, Freehold Royalties stands out. It doesn’t promise explosive growth or tech-style headlines. But it does offer something many investors value more: reliable monthly income, a simple and proven business model, and a generous yield that outpaces most of what you’ll find elsewhere on the TSX. For those looking to build or protect a passive income stream, this energy titan might be just the ticket. It’s not hype, it’s just quietly handing out cash, one dividend cheque at a time.
