Freehold Royalties Ramps Up Dividend By 33%; Street Remains Bullish

Freehold Royalties announced on Dec. 15 that the company is raising its monthly dividend per share by 33.3% to C$0.02 from the C$0.01 previously paid.

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Freehold Royalties (FRHLF), which is an oil and gas royalty company based in Calgary, will also pay a dividend equivalent payment of $0.02 to the recently issued subscription receipt holders.

The annual dividend of an equivalent of $0.192 per share now reflects a dividend yield of 4.4%.

The dividends are payable on Jan. 15 to the shareholders and subscription receipt holders, respectively, of record at the close of business on Dec. 31.

On Nov. 24, Freehold company announced the acquisition of a US multi-basin royalty package for $58 million. The transaction was financed via a combination of a bought deal treasury offering of subscription receipts worth $43 million, private placement of subscription receipts of $13.4 million, and the remaining from its existing credit facility.

The acquired assets have the potential to produce funds from operations of $12 million in 2021, the company had said. Freehold estimated a production volume between 10,000-10,500 barrels of oil equivalent per day for 2021.

On Dec. 10, National Bank analyst Travis Wood upgraded the stock’s rating to Buy from Hold and raised the price target from $3.54 to $5.88 (34% upside potential).

According to Wood, the acquisition will present compelling upside prospects apart from “being accretive on several fronts”. The analyst considers the company to be well-positioned for liquidity post-acquisition with a potential for further “incremental, opportunistic deals.”

Meanwhile, FRHLF shares have lost 21.2% YTD and are trading at a premium of 41% to their 52-week high. (See FRHLF stock analysis on TipRanks)

From the rest of the Street, the stock scores a Strong Buy analyst consensus based on 8 Buys including Wood’s and 1 Hold. The average price target of $5.31 implies upside potential of 21.2% to current levels.