If you’re looking to earn regular income from your savings, a high-quality and reliable monthly dividend stock can be one of the best ways to put your cash to work, especially if the alternative is waiting a year for a GIC payout.
A traditional guaranteed investment certificate (GIC) offers the advantage of protecting your original investment and paying an agreed rate of interest. However, choosing a one-year GIC that locks in your money and pays at maturity means waiting for that income.
Meanwhile, a high-quality dividend stock can pay you regularly while also offering capital gains potential as the business grows. You can also sell your shares at the market price without waiting for a maturity date if something comes up and you need the cash, the investment changes, or new opportunities arise.
So, if you’re a dividend investor looking to pair attractive monthly income with capital gains potential over the long haul, Freehold Royalties (TSX: FRU), which currently yields roughly 6.3%, is one of the best to consider.
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Why Freehold is one of the top monthly dividend stocks to buy
One of the biggest advantages of owning Freehold is that it’s an energy stock that can benefit from oil and gas production without having to drill and operate the wells itself.
For example, the company owns mineral rights and royalty interests across Canada and the United States, where other companies handle the drilling and development while Freehold simply collects royalties from the oil and gas they produce.
That’s important because drilling and operating wells can be expensive, so Freehold’s asset-light business model helps it avoid many of those costs and operating risks while keeping a significant portion of its revenue to support the dividend and fund future growth.
Furthermore, its expansion into the U.S. over the last several years has given it a much broader portfolio, with its U.S. assets accounting for roughly 45% of its royalty production as of last year.
That regional diversification is especially important in the energy sector because it helps Freehold spread its risk while giving it more ways to benefit as companies develop oil and gas resources across North America.
Moreover, although Freehold already offers a considerable yield of roughly 6.3%, it doesn’t need to pay out all the cash it generates to support that dividend, with management targeting a long-term payout ratio of around 60% of funds from operations.
And with higher oil prices boosting its current cash flow, its payout ratio already fell to just 57% in the second quarter, leaving it with considerable cash even after paying shareholders that attractive dividend.
In fact, management has said the dividend is supported down to US$50 a barrel for WTI oil, well below recent prices, giving investors a reason to be confident in its ability to keep paying them even if energy prices weaken.
Keeping cash available for long-term growth
Although Freehold has kept its monthly dividend at its current level since 2022, shareholders are already collecting an attractive yield, so keeping that dividend sustainable while retaining capital to strengthen and expand its portfolio can make a lot of sense over the long haul.
For example, between 2021 and 2025, Freehold invested more than $1 billion in acquisitions, expanding its royalty portfolio across both Canada and the United States.
Those acquisitions give it more assets that can generate cash for years, while producers can also continue drilling new wells on lands where Freehold already owns royalties, giving the company another way to grow without having to fund the wells itself.
That’s why these new acquisitions can make a lot of sense, especially as Canada and the U.S. have continued to ramp up energy production in recent years.
And that growth has already benefited shareholders, with Freehold’s funds from operations per share increasing 39% between 2018 and 2025, showing how expanding the business can create value beyond the dividend you collect each month.
So, if you’re an income investor who has got cash to invest for the long haul, finding high-quality monthly dividend stocks like Freehold can boost your passive income while also giving you capital gains potential and flexibility that a traditional GIC can’t offer.
