A Hands-Off Canadian Energy Stock That Cuts You a Cheque Every Month

You have probably heard stories about someone finding oil on their land and living off the resulting passive income.

An energy company shows up, drills a well, and the landowner starts receiving royalty cheques every month. They do not operate the well. They do not hire workers. They simply own the rights to the land and collect a slice of the production.

You can do something similar without owning acreage or negotiating with oil companies. All you have to do is buy shares of Freehold Royalties (TSX:FRU).

What is Freehold Royalties?

Freehold Royalties is not a traditional oil producer company. It also does not run pipelines, nor does it manage refineries. Instead, it owns royalty interests on millions of acres of land across Canada and the United States.

Freehold owns the rights to oil and gas production on that land. When an operator drills and produces oil or natural gas, Freehold receives a percentage of the revenue. This all comes from their gross overriding royalties, which are contractual rights to a portion of production from wells drilled by other companies.

Because Freehold does not operate wells, it avoids many of the costs traditional energy companies face. There are no drilling expenses, no field-level operating costs, and no abandonment liabilities. That makes the business far more capital-light.

The financial results reflect this model. Operating margins are often dramatically higher than those of oil producers. The company also carries relatively modest debt compared to many exploration and production firms.

The Freehold dividend

For income-focused investors, the main attraction is the dividend. Freehold pays a $0.09 per share dividend monthly. If you annualize the most recent monthly payout and divide it by the current share price, the yield comes out to 6.2% as of February 20.

That yield will fluctuate with the price of oil and gas, since royalty revenue depends on commodity prices and production volumes. If the share price goes down, the yield will also be higher, assuming no dividend cuts.

Importantly, management targets a payout ratio of around 60% of free cash flow. That means they aim to keep a buffer rather than distributing every dollar earned. During weaker commodity environments, this policy helps protect the dividend.

Freehold has also stated that its dividend is sustainable at oil prices well below recent highs. Compared to smaller, highly leveraged small-cap oil explorers, that makes it relatively resilient.

The post A Hands-Off Canadian Energy Stock That Cuts You a Cheque Every Month 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 $20,155.76!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 90%* – a market-crushing outperformance compared to 81%* 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 February 17th, 2026

More reading

• 5.7% Yield: 2 Income Stocks to Buy in February
• The Ideal 6% TFSA Dividend Stock Paying Constant Cash
• 3 TSX Monthly Dividend Stars Yielding Over 5 Percent
• A 6.16% Yield TFSA Pick That Pays Consistent Cash
• Today’s Perfect TFSA Stock: 0.5% Monthly Income

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