In a volatile market, income-generating stocks present some assurance, and a Tax-Free Savings Account (TFSA) relieves you from the stress of income tax. Standing today, if you were to get the best income stock for a TFSA, Freehold Properties (TSX:FRU) would be one of them.
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Why is Freehold Properties a good income stock?
Freehold Properties works on the royalty model. It acquires land rich in oil and natural gas and gives it to oil producers to drill. This model is low-risk as Freehold bears no capital cost to develop the land, operation cost to drill, or abandonment cost. Freehold receives royalties on total production and the realized price of oil. No costs and only passive income from royalties make it an attractive investment.
During the 2014 oil crisis, Freehold’s strategy backfired as capital investment in oil declined and many oil producers went bankrupt. At that time, Freehold survived by slashing dividends from $1.68 in 2014 to $0.54 in 2016. The turning point for Freehold came in 2020 when it acquired assets in the United States. In December 2024, it acquired several properties in the Midland basin, which increased its net debt but also its production. In 12 months ending September of 2025, Freehold deployed $975 million in 20 transactions and generated a 15% return on investment (ROI).
Expanding its asset base in the United States has helped Freehold increase its product mix from oil by 10% and command 33% premium pricing due to light oil volumes and access to the Gulf Coast market. Its US expansion and high oil prices helped Freehold increase its annual dividend per share from $0.30 in 2020 to $1.08 in 2023. The company can sustain the $1.08 dividend even at a US$50/barrel WTI crude price.
This TFSA stock provides calm in the chaos
Freehold is a TFSA stock to own because it has sustained its $1.08 annual dividend per share even when oil prices normalized in 2024 and tumbled in 2025. The geopolitical uncertainty, shifting trade dynamics, US trade nationalist policies, and Venezuela’s oil exports have created risks of oil oversupply. Despite these underlying risks, WTI fell to US$55/bbl.
The Canadian government’s push to develop energy infrastructure and increase exports to non-US countries could drive oil and natural gas production. LNG Canada’s Train 2 and more such logistics infrastructure will increase access to Canada’s natural gas liquids (NGL).
The demand for NGL will only increase as several data centres shift to natural-gas-fired power plants. Moreover, Canada is actively in talks with China to export more crude oil and NGL. The last five years, from 2020 to 2025, saw Freehold Properties benefit from US expansion and an increasing mix of lightweight oil. The next five years could benefit from the North American export of oil and NGL, with Canada increasing export access to its reserves.
Freehold Properties can give you 0.5% monthly income
What Freehold Properties can give investors is a stable monthly income of 0.5% and a potential for capital appreciation. Its share price has surged 161% in the last five years on the US expansion opportunity. Although energy markets are volatile, Freehold’s exposure to both Canada and US oil and NGL makes it a beneficiary of the changing global energy supply chain.
Freehold Properties’ share is currently trading at $17.50 per share, and it pays $0.09, which converts to 0.5% monthly yield. It will continue to acquire more land reserves that offer a better product mix. This time, the focus will be on NGL reserves. More acquisitions mean more production, which will convert into higher volume and higher cash flow.
The 2024 acquisitions have increased Freehold’s net debt to 1.1 times its trailing funds from operations (FFO), which is within its target of 1.5 times. However, its dividend payout ratio has increased to 75% from its long-term target of 60% as lower oil prices reduced its FFO. Freehold will manage this ratio by increasing FFO through more oil production or by reducing outstanding shares through share buybacks.
On one hand, you can see your investment value grow as Freehold acquires more reserves. On the other hand, you can enjoy dividend growth if oil and gas prices increase.
