A monthly dividend yielding almost three times the Bank of Canada’s policy rate can make a rate pause considerably more interesting. Instead of waiting for the next central bank move, investors could collect cash from a Canadian company earning royalties every time someone else produces oil or natural gas from its land.
The Bank of Canada held its policy rate at 2.25% in July as improving economic growth collided with lingering inflation and trade uncertainty. That decision leaves savers and investors in an awkward middle ground, with rates no longer unusually high but not falling quickly enough to lift every rate-sensitive stock.
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What a rate pause means
Stable rates can reduce the risk of another sudden borrowing-cost shock, while making established income investments easier to compare with savings products and bonds. A 6.6% yield may look attractive beside a 2.25% policy rate, although investors still need to see cash flow strong enough to support the payment.
That search leads to Freehold Royalties (TSX:FRU), a Canadian energy company that pays shareholders every month. FRU stock recently offered a $1.08 annual dividend, reflecting that 6.6% yield. So, let’s get into it.
A different energy business
FRU doesn’t operate drilling rigs or build expensive oil projects. It owns royalty interests across approximately six million gross acres in Canada and 1.2 million drilling acres in the United States.
Energy producers develop those properties using their own capital, then FRU stock receives a percentage of the resulting revenue. This structure gives shareholders exposure to production and commodity prices without forcing the company to fund every well, which can produce attractive margins and recurring cash flow.
That cash flow supported $59 million in funds from operations (FFO) during the first quarter. FRU stock paid approximately $44 million in dividends, placing the payout near 75% and leaving additional money for acquisitions, debt reduction, and future growth.
Room to keep growing
Production reached 15,533 barrels of oil equivalent per day (boe/d) during the quarter, with liquids representing 65% of output. Freehold expects 2026 production between 15,500 and 16,300 boe/d, giving the business a solid base while operators continue developing its acreage.
The United States now supplies roughly half of FRU’s revenue and exposes the company to premium-priced barrels from major producing regions. That geographic mix complements its large Canadian portfolio and reduces its dependence on one basin or operator.
Management also believes the current dividend remains supported around US$50 per barrel West Texas Intermediate (WTI) oil. That estimate isn’t a guarantee, but provides a useful stress test for investors building a portfolio of Canadian dividend stocks.
Why monthly income helps
FRU stock’s payment schedule lets investors reinvest cash throughout the year instead of waiting for four larger quarterly deposits. Each new share can then produce another monthly investment, allowing monthly dividend income to compound while rates remain uncertain.
The stock’s current yield also provides a meaningful return without requiring an immediate interest-rate cut. Any future dividend growth or share-price appreciation would arrive on top of that starting income.
That said, FRU stock still depends on commodity prices and the willingness of outside producers to drill its lands. A prolonged decline in oil or natural gas prices could reduce activity, weaken funds from operations, and eventually pressure the dividend. The Bank of Canada’s rate pause won’t remove those energy risks, so FRU stock works better as part of a diversified income portfolio than as its only holding.
Bottom line
Freehold Royalties offers a roughly 6.6% yield, monthly cash payments, and a capital-light way to benefit from North American energy production. Investors who can handle commodity volatility could collect substantial income now, then let future drilling turn today’s royalty lands into a larger retirement paycheque.
