A monthly dividend is always appealing, especially if you’re looking to build a reliable stream of passive income. Still, the quality of the business matters just as much as the size of the payout. That’s why I prefer looking at how a company makes its money rather than focusing only on the dividend yield. If the underlying stock is strong, the income becomes much more meaningful.
Freehold Royalties (TSX:FRU) is a good example of such a stock. Unlike most traditional oil and gas producers, Freehold doesn’t drill wells itself. Instead, it owns royalty interests across Canada and the United States, earning royalties when other companies produce oil and gas on its lands. That capital-light approach has helped the company consistently return cash to shareholders while benefiting from energy production across some of North America’s most active regions.
In this article, I’ll tell you why this monthly dividend stock deserves a closer look, how its royalty-based business model generates steady cash flow, and whether its 6.7% yield appears sustainable.
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A high monthly yield
Despite the commodity market volatility, Freehold stock has risen 25% over the last year, reflecting investor confidence in the company’s business model. With this, the stock now trades at $15.99 per share, giving it a market cap of roughly $2.6 billion.
At today’s share price, it offers an annualized dividend yield of about 6.7%, with dividends paid every month. The company currently distributes $0.09 per share each month, making it an attractive choice for investors who value consistent income.
The dividend also continues to be supported by Freehold’s business. In the first quarter of 2026, Freehold reported a dividend payout ratio of 75%, allowing it to reward shareholders while still retaining cash to strengthen and expand its portfolio.
A business model built for income
Currently, Freehold owns royalty interests covering about 6.1 million gross acres in Canada and another 1.2 million gross drilling acres in the United States. Its U.S. assets include premium producing regions such as the Permian Basin, Eagle Ford, Haynesville, and Bakken, giving the company exposure to some of North America’s most productive energy plays.
Because Freehold doesn’t have to fund drilling programs itself, it can generate strong cash flow without the same capital requirements and other challenges faced by traditional energy companies. As production grows on its royalty lands, the company benefits while keeping its own operating costs relatively low.
That model continued to deliver solid results in the first quarter of 2026. Freehold generated $78 million in quarterly revenue and $59 million in funds from operations (FFO), with crude oil and natural gas liquids accounting for roughly 90% of total revenue.
The company also continued investing in future growth, acquiring $19 million of royalty interests in the Permian Basin during the quarter. The acquisition further strengthened its exposure to one of the continent’s most active and profitable oil-producing regions.
Positioned for long-term income
Freehold’s diversified portfolio gives it exposure to hundreds of operators across Canada and the United States, helping create a broad base of royalty income rather than relying on a single project or producer.
The company also expects its production to strengthen through the second half of 2026 as drilling activity and well completions increase, while its liquids-focused asset base continues to support meaningful cash flow generation.
For income investors, its diversified royalty portfolio, disciplined capital allocation, and monthly dividend payments could make Freehold an attractive holding for long-term income investors.
