Bills have this unstoppable habit of arriving every month whether the stock market is feeling cooperative or not. That’s what makes dividend income so appealing. Build enough of it and eventually part of those monthly expenses can be covered by businesses you own rather than another withdrawal from your paycheque. The trick is finding a dividend that can survive long enough to become useful.
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Useful if it lasts
A 7% yield looks wonderful, certainly, that is until the company cuts its dividend in half. That’s why I’d look beyond yield and ask three questions: how much cash is being paid out, whether that cash flow can grow, and how often investors actually receive it.
Payment frequency doesn’t change the underlying return. Yet a monthly dividend can make budgeting easier for someone eventually using investments for income.
Before retirement, those payments can instead be reinvested. Each dividend buys more shares, those shares produce more dividends, and compound growth gets increasingly involved. One Canadian stock currently offers that combination with a yield above 6%.
FRU
Freehold Royalties (TSX: FRU) doesn’t operate oil rigs or build pipelines. Instead, it owns royalty interests across Canada and the United States. Other companies spend the money drilling and operating wells on its lands, while Freehold collects a percentage of the resulting production revenue. That creates an appealing arrangement. Let somebody else buy the expensive machinery.
Freehold also avoids most operating, capital, and abandonment costs associated with producing the oil itself. The model becomes particularly attractive when drilling activity rises.
During the second quarter, operators drilled 300 gross wells across Freehold’s portfolio, up 35% from the previous quarter. Higher realized commodity prices helped push funds from operations up 32% sequentially to $78 million. Meanwhile, Freehold reduced net debt by $24 million.
Earning income
Freehold currently pays $0.09 per share every month, or $1.08 annually. At writing its price was $17.01, with a yield of roughly 6.3%. Here’s what a $50,000 investment would look like, which works out to $264.51 per month.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| FRU | $17.01 | 2,939 | $1.08 | $3,174.12 | Monthly | $49,992.39 |
It won’t pay every household expense, but covering more than $3,100 annually without selling a single share is hardly pocket change. Hold those shares inside a Tax-Free Savings Account (TFSA) with sufficient contribution room and those dividends could also arrive tax-free.
More importantly, the payout currently looks manageable. Freehold paid out 57% of second-quarter funds from operations as dividends, down from 75% during the first quarter. Management targets a payout ratio of roughly 60%. That leaves some breathing room for debt reduction and acquisitions rather than sending every available dollar out the door.
Considerations
There’s an obvious catch. Freehold may avoid drilling costs, but it cannot avoid commodity prices. Lower oil prices can reduce revenue, cash flow, drilling activity, and eventually the amount available for dividends.
The board reviews the dividend regularly, so the current $0.09 monthly payment is not guaranteed. Yet Freehold entered the second half with net debt at only about one times trailing funds from operations (FFO), while increased drilling should begin contributing more meaningfully to production later in 2026 and into 2027.
That combination gives the current 6.3% yield more support than the headline number alone suggests.
Bottom line
Building enough passive income to cover every bill takes considerable capital and time. Covering one bill, then two, then three is much more realistic.
Eventually, opening another monthly statement might become slightly less irritating when somebody else’s oil wells are helping pay it.
