Canadians on the hunt for passive income in an uncertain market may want to look to some of the top Canadian energy stocks. Freehold Royalties (TSX:FRU) is a Calgary-based company that is engaged in acquiring and managing royalty interests in crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Shares of this energy stock have dropped 2.8% month over month as of close on Monday, May 1. That pushed the stock into negative territory in the year-to-date period.
This Canadian energy stock has moved up marginally year over year. However, we are not interested in its capital growth potential today. Instead, I want to focus on its passive income potential in the spring of 2023 and beyond. Let’s jump in.
Why Canadians might want to churn out passive income right now . . .
The S&P/TSX Composite Index dropped 21 points on May 1. Energy turned out the worst performance of the market’s top sectors, while Financials also finished the day in the red. Canadian stocks broadly performed well in the spring season. However, Canadian business confidence has been chipped away according to recent surveys. Rising interest rates, supply chain disruptions, geopolitical strife, and the knock-on effects of the pandemic have continued to weigh on the domestic and global economy.
In this environment, Canadian investors may be looking for more stability in their portfolios. Like me, more are looking to generate passive income in this climate. Better yet, you should look to churn out monthly passive income in a Tax-Free Savings Account (TFSA). That will mean your dividend gains will come to you entirely tax free!
Here’s why this Canadian energy stock is a perfect target in the spring of 2023
Freehold Royalties is committed to rewarding its shareholders over the long term. It boasts a phenomenal track record consistently delivering dividends that are supported by its steady cash flows. The company released its fourth quarter and full year fiscal 2022 earnings on March 1, 2023.
This company delivered royalty and other revenue growth of 88% to $393 million for the full year on the back of higher production volumes and improved commodity prices. Moreover, Freehold achieved record funds from operations (FFO) of $316 million, or $2.10 per share – up from $189 million, or $1.39 per share, in fiscal 2021. It also paid $0.94 per share in dividends in fiscal 2022, which was up 128% over the total dividends paid in the previous year.
Freehold Royalties: How this passive income beast can help reach your goals!
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For our hypothetical example today, we are going to be utilizing $30,000 in our TFSA portfolio. Freehold Royalties stock closed at $14.67 per share on Monday, May 1. We can snatch up 2,000 shares of this Canadian energy stock for a purchase price of $29,340. This stock offers a monthly distribution of $0.09 per share. That represents a very tasty 7.3% yield. This investment will allow us to generate monthly passive income of $180 per month. That works out to annual tax-free passive income of $2,160.