Oil has been the center of attention amidst all the geopolitical tensions. Once again, it has taken center stage, and this time the rift is between Canada and the United States. The United States has imposed a 10% tariff on oil exports from Canada. As oil suppliers absorbed the tariff cost, the West Texas Intermediate (WTI) crude price fell from over US$70 to slightly over US$60/barrel. Each Canadian oil company reported a steep dip from the windfall gains from the cyclical increase in oil prices post-pandemic.
Thus, oil companies generally don’t pay monthly dividends. But this 8% yield stock does.
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A Canadian dividend stock with a monthly payout
Not exactly an oil producer, but a little early in the supply chain, Freehold Royalties (TSX:FRU) acquires properties, such as oil wells with high-quality reserves and a long economic life. The company does not produce oil but leases these wells to oil producers like ExxonMobil and ConocoPhillips for a royalty.
Freehold does not bear the cost of production or cleanup. It earns royalties from oil producers depending on the oil price and the volumes produced and pays out 60% of its funds from operations as dividends.
As the wells dry up, their productivity rate declines, thereby increasing production costs and reducing royalties. Freehold acquires quality assets with long economic life to create value and maximize royalty interest by auditing the properties.
The second quarter was weak for Freehold Properties as tariffs reduced the WTI crude oil price to US$63.74 from US$71.42 in the first quarter. Moreover, fewer oil wells were drilled. However, overall oil production rose as a few oil wells outperformed the average.
The weak performance increased the dividend payout ratio to 78% in the second quarter, but this is not a cause for concern for investors. Freehold can sustain its current monthly dividend per share of $0.09 even at US$50/barrel.
Behind the 8% yield
The yield is the dividend as a percentage of the share price. When the 10% tariff took effect on April 3, Freehold Properties’ share price declined by as much as 16% in that week. However, the stock recovered to its March 2025 level as the price adjusted to tariffs.
This recovery shows that the company can absorb the 10% tariff and still pay dividends at the current rate. Few oil-related companies give monthly payouts as they face the risk of fluctuating oil prices and depleting reserves. Even Freehold faces this risk, but relatively lower, as it does not perform the operations of oil production and cleanup.
You could consider investing in this stock while oil is in a cyclical uptrend and enjoy high yields. While Freehold will continue to pay monthly dividends as it has been for the last 28 years, there is a risk of a dividend cut if oil prices remain consistently near US$60/barrel.
The US$50/barrel is the price that Freehold can sustain in the short term while the oil wells outperform. As the reserves deplete, it moves on to acquiring new reserves for which it uses debt funding and channels the cash flow to repay debt. It does so to maintain its net debt within the target range of 1.1 times its funds from operations.
How can you make the most of Freehold Properties’ monthly payout?
If you invest $3,000 now, you can buy 223 shares of Freehold Properties and earn $20 per month in dividends. You can use this amount to buy high-risk penny stocks like Hive Digital Technologies that have the potential to give you 70–80% returns. You could also use this amount to invest in other long-term monthly payout stocks, like CT REIT, whose dividends are sustainable.
