Q: Morning
Thoughts on Freehold Royalty
FRU-TO as a good sustainable dividend stock?Thank you
Thoughts on Freehold Royalty
FRU-TO as a good sustainable dividend stock?Thank you
5i Research Answer:
FRU operates as a royalty company that owns royalty interests in the oil, gas and potash properties. The business’s economics are highly favourable as the company does not require any meaningful capital to grow over time. FRU’s revenue and earnings are subject to the price of commodities which tend to demonstrate fluctuations in price. Consequently, FRU’s dividend payment has also varied over time. FRU’s growth was driven by the reinvestment of its cash flow back into acquiring additional land and royalty interests. FRU’s balance sheet is decent with a net debt/EBITDA of 0.8x. Overall, FRU is a good dividend name, but we prefer other names that are more stable in their business model such as ENB, H, and X.