Invest $5,000 in This Dividend Stock for $320 in Passive Income

The energy sector is the most happening sector for dividends and capital gains post-pandemic. Steep dips and sharp surges are the new normal for oil and gas companies. Oil and gas pipeline companies are experiencing a share price rally driven by oil price increases resulting from energy shocks and the Canadian government’s initiative to accelerate energy infrastructure development.

The Iran war pushed oil stocks to a new high, making a 3.25% annual dividend yield the new normal. However, one energy stock continues to offer a higher dividend yield of 6.5%.

Invest $5,000 in this dividend stock for $324 in passive income

Like other energy stocks, Freehold Royalties (TSX:FRU) stock surged 22% between January and March as oil prices surged. However, the share price started falling after March 11 as it reported weaker 2025 earnings due to lower commodity prices in the fourth quarter. On April 13, the company’s chief financial officer resigned. The press release did not specify the reason for the resignation. This is the second top official to exit after the resignation of the chief operating officer in November 2025.

The top official’s exit is not a positive sign. Interestingly, the company’s share price remains unaffected by these exits.

While Freehold Royalties shows signs of risks, its dividends are too good to ignore in the energy upcycle. The company can sustain its current annual dividends of $1.08 per share even at US$50 West Texas Intermediate (WTI). What makes me bullish on this stock is that it has very low operational risk.

Oil companies like ConocoPhillips pay royalty for using Freehold’s reserves. Oil companies bring the equipment, drill for oil, and close the wells. Freehold gets a percentage of the value of the oil produced. Hence, the exit of the chief operating officer was not significant. The company even removed that role from its organizational structure.

The first quarter of 2026 could see windfall earnings as the oil price touched US$125. WTI has corrected to around US$84, but it is still better than the US$64.81 realized in 2025. The company could probably use the surplus to reduce debt and increase free cash flow. Its dividend payout ratio reached 87% in the fourth quarter of 2025 when oil prices fell. Its long-term payout ratio target is 60%.

The potential risk that comes with this stock

The recent resignation of the chief financial officer (CFO) could be concerning, as the new CFO will have to first gain the trust of shareholders by improving the company’s finances. The role of CFO is important as they make deal negotiations easier, handle royalty calculations, and manage cash flow and debt efficiently.

While the management issues get resolved, Freehold will continue to mint money from the royalty revenue oil companies pay Freehold for using its wells.

This dividend stock could pay $320 in annual passive income

You could consider investing $5,000 to buy 296 shares of Freehold that pay a $1.08 annual dividend per share in 12 monthly installments. It can pay you $320 in annual passive income in 2026 as oil prices are unlikely to fall below US$60/barrel anytime soon.

StockShare PriceDividend per ShareDividend on $5,000Number of SharesFreehold Royalties$16.90$1.08319.68296

For every US$1/barrel change in WTI, Freehold’s funds from operations change by $3.9 million. The company assumed US$65/barrel WTI for 2026. So far, the WTI has been above US$80.

The company will allocate its surplus cash flow to acquire more land, repay debt, and buy back shares. That is the order of priority after paying dividends. Its stock price will correct as the oil price falls. However, improvement in fundamentals could help Freehold sustain its higher share price.

The post Invest $5,000 in This Dividend Stock for $320 in Passive Income appeared first on The Motley Fool Canada.

Should you invest $1,000 in Freehold Royalties Ltd. right now?

Before you buy stock in Freehold Royalties Ltd., consider this:

The Motley Fool Canada team has identified what they believe are the top 10 TSX stocks for 2026… and Freehold Royalties Ltd. wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have over $18,000!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 94%* – a market-crushing outperformance compared to 85%* for the S&P/TSX Composite Index. Don’t miss out on our top 10 stocks, available when you join our mailing list!

Get the 10 stocks instantly #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of April 20th, 2026

More reading

• Inflation Just Hit 2.4%: 3 Canadian Dividend Stocks Built to Hold Up
• How to Earn $500 a Month From Freehold Royalties Stock
• 2 Energy Dividend Stocks That Look Worth Picking Up Right Now
• Beyond the Banks: 3 TSX Dividend Stocks Most Canadians Ignore
• 3 Canadian Stocks Built for Investors Who Want to Be Paid First

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.