Freehold Royalties Ltd (FRU.TO)

Over 70% of their business is based on a gross overriding royalty, so they have exposure to the top line of the business, but not all the operating costs underneath it. There is a lot of merit in this kind of a business model. They tend not to hedge production, so you get full exposure to the upside in a name like this.

A great, long term holding. It gives you exposure to a broad variety of wells, without taking “drill bit” risk. A solid management team. However, this is not a great time to be holding a resource related stock. If you own, in the long-term you will do fine with this.

Has added to his position in the last several months. Likes the royalty structure, and this company is pretty conservative. They did an acquisition of Husky (HSE-T) assets recently, and did an equity issue that was oversubscribed. Believes this will be one of the 1^st companies to increase their dividend.

(A Top Pick May 1/15. Down 33.06%.) He got stopped out on this.

(A Top Pick May 1/15. Down 24.61%.) Sold this a year ago. Had bought it in order to hide when oil got worse. It’s attractive at this price if you think oil is going higher. He would wait, because it has had a nice rebound.

He allows things to float up and down and does not use stops. They get compensated when people drill on their lands. He thinks they are looking at a dividend cut this week but he still owns it in portfolios.

This gets a royalty on production and drilling is down, so doesn’t see any need to rush to own this.

This receives royalties from the oil and gas industry. They adjust their distribution to the spot price of oil, so are running a distribution that is reflective of a $38-$39 oil price. They say that the distribution at the present oil price is sustainable. They have the best balance sheet in the oil/gas industry.

(Market Call Minute.) A good strong company, but she prefers PrairieSky (PSK-T) right now, if you are looking for royalties.

This and PrairieSky (PSK-T) are great companies. These should be great types of businesses looking after pension type money, but they are just too expensive. Also, the gas price is horrible. The risk is that you might be backing out gas from Western Canada, and does it go? Maybe it just doesn’t get produced.

He doesn’t do resource stocks any more. This has been a great long term Hold if you want exposure to oil/gas in a conservative way. This is a royalty. It is a capital efficient structure. They do a little bit of drilling for tax purposes, but the bulk of their income comes in through someone else doing the drilling. As a long term holding this is a good one, especially for retirees. Dividend yield of about 7%.

A royalty company. Basically they own different types of land leases where people pay to drill on their land and they get a percentage of the net back on the production. It’s a good business in the oil/gas sector because it is lower capital cost and higher cash flow. They have been a good dividend payer over time. Cut their dividend in the current downturn, but the yield is still very attractive. Feels the dividend is sustainable at current commodity prices. Dividend yield of 7.8%.

(A Top Pick July 4/14. Down 55.27%.) The royalty concept is an excellent investment vehicle to own, but there are others he would prefer today. Dividend yield of 7.7%.

They continue to pay out way, way more in dividends than what they earn. Because of this, their balance sheet continues to be eaten up. However, if people buy the high-yield and you get a higher price to Book and they issue stock at a very high price to BV, they can essentially use the proceeds of that stock to pay out some of that dividend. It is a great story as long as it works. The problem is that when the oil price collapsed, the story came to an abrupt end. The dividend has not, but the stock has collapsed down to $11. They still have a pretty good balance sheet and he sort of expects they will continue to pay the dividend. Dividend yield of 7.3%.

Sold his holdings last December and hasn’t looked at the valuations since. However, as a long-term story, he thinks it is a great one. Dividend yield of over 10%, which usually indicates a bit of a warning signal. If you own, he would just stick with it right through this downturn. 3-5 years from now you will be very happy.