Dividend stocks can be excellent investments for anyone trying to build a reliable passive-income stream. Rather than relying entirely on share price appreciation, investors get paid simply for continuing to hold their shares. Usually, those payments arrive once every three months.
However, not every dividend stock follows the typical quarterly schedule. Some companies distribute cash to shareholders every single month, making them particularly interesting for investors who want consistent income.
Freehold Royalties (TSX: FRU) is one such stock. At current levels, it offers an attractive 6.17% dividend yield and pays its distributions monthly. While the regular cash flow is appealing, the company’s unusual business model is what really makes the stock worth a closer look.
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Freehold Royalties
Freehold Royalties is an energy company, but it operates very differently from a traditional oil producer. Rather than spending billions drilling wells, operating equipment, and developing oil fields, Freehold owns royalty interests in oil and natural gas properties across North America.
Energy producers operate on those lands and pay Freehold a portion of the value of the resources they produce. That allows the company to benefit from oil and gas production without taking on the same capital and operating costs faced by the companies actually drilling the wells.
It is a relatively simple business model, but it can generate substantial cash flow when commodity prices cooperate.
In the second quarter of 2026, Freehold generated $100 million in revenue and $78 million in funds from operations. The company also reduced net debt by $24 million during the quarter, ending the period with $251 million in net debt.
Most importantly for income investors, Freehold returned $44 million to shareholders through monthly dividends. Those distributions represented a payout ratio of 57% of funds from operations, leaving the company with a reasonable amount of financial flexibility.
Getting paid every month
As of this writing, Freehold Royalties pays investors $0.09 per share each month. That works out to $1.08 per share annually and, at current levels, translates to a 6.17% dividend yield.
The frequency does not technically make the dividend more valuable. A 6.17% annual yield is still a 6.17% yield whether the company pays it monthly or quarterly. However, receiving cash every month can make dividend income much more convenient.
Retirees can use the payments to help cover recurring expenses, while investors still building their portfolios can reinvest those dividends more frequently to purchase additional shares. Over a long investment horizon, consistently reinvesting distributions can let compounding do more of the heavy lifting.
However, that attractive yield does come with risk.
Freehold’s royalty model protects it from many of the operating costs faced by traditional energy companies, but it does not protect the company from commodity prices. Oil prices directly influence how much royalty revenue Freehold can generate.
The company has also cut its dividend several times throughout its history during major oil downturns and stock market crashes. If oil prices remain weak for an extended period, cash flows can fall and put pressure on the payout.
That history is an important reminder that a high-yielding monthly dividend should not automatically be treated as guaranteed income.
Foolish takeaway
A monthly dividend can be incredibly appealing, especially when the stock offers a yield well above what investors can get from many traditional dividend stocks on the TSX.
Freehold Royalties has even more going for it than the payment schedule. Its asset-light royalty model allows it to participate in North American oil and gas production without taking on the massive costs associated with operating wells. Recent results also show healthy cash generation and manageable dividend coverage.
Still, this is an energy stock. Freehold’s fortunes are closely tied to commodity prices, and its dividend history shows that management will reduce the payout when industry conditions become difficult enough.
For investors comfortable with that cyclicality, Freehold Royalties can be an interesting income stock to consider. A 6.17% yield is already attractive, but getting a piece of that income deposited every single month makes the investment even more compelling.
