Whether or not you’re into investing, you’re likely already familiar with royalties. Royalties are essentially fees paid for the ongoing use of someone else’s property. This can include everything from books and patents to oil and gas. When it comes to royalty stocks, these can provide an interesting investment option. These companies offer upfront capital to mining companies to fund exploration or development projects, particularly in the TSX mining sector stocks.



Compared to directly owning a mining company, royalty companies have less exposure to the risks associated with operating mines, such as fluctuations in operational costs or mine development issues. If you’re looking for a safer option from royalty stocks, consider these three companies: Freehold Royalties, Wheaton Precious Metals, and Osisko.

Freehold Royalties (TSX: FRU)

First, let’s examine Freehold Royalties (TSX: FRU). Freehold focuses on royalties from established oil and gas properties, particularly in the Permian Basin of North America. This approach reduces risk compared to companies financing riskier exploration ventures. Established properties tend to have lower operating costs and predictable production, translating to a more reliable stream of royalty income for Freehold.


Freehold has managed to secure a stable dividend, prioritizing returning a consistent payout to shareholders. The company targets a payout ratio of around 60% of its earnings, which can be attractive for income-oriented investors seeking regular returns. Currently, Freehold offers a substantial 7.8% dividend yield, making it an appealing option for those looking to generate passive income.

Wheaton Precious Metals (TSX: WPM)

Another strong option is Wheaton Precious Metals (TSX: WPM). WPM deals exclusively with precious metals, primarily gold and silver. These commodities tend to hold their value well over time and can even act as a hedge against inflation. When gold and silver prices rise, WPM profits significantly due to their low-cost metal acquisition, offering substantial upside potential for investors.


WPM secures agreements with established mines that have low operating costs and long mine lives, reducing the risk compared to financing riskier ventures. The company provides upfront capital to miners in exchange for the right to buy gold and silver at pre-determined prices, often below market value, locking in profit margins when they sell the metals at market prices.


WPM has a diversified portfolio of streaming agreements across multiple mines, reducing their reliance on the performance of any single operation. With a solid 1.1% dividend yield, Wheaton Precious Metals is an attractive option for investors looking to add precious metals exposure to their portfolios.

Osisko (TSX: OSK)

Lastly, Osisko Mining (TSX: OSK) is a great choice for investors seeking more focus on gold from their royalty companies. Unlike some royalty stocks with global reach, Osisko concentrates on royalties from mines in North America, particularly Canada. Canada’s stable political climate and well-established legal system reduce the risks associated with operating in riskier jurisdictions.


Osisko’s portfolio primarily focuses on gold royalties, offering exposure to a precious metal known for its ability to hold value and potentially act as a hedge against inflation. The company holds over 135 royalties, streams, and off-take agreements, reducing reliance on any single mine’s performance. Notably, Osisko has a significant stake (5% net smelter return) in the Canadian Malartic mine, the largest operating gold mine in Canada.


Osisko aims to grow its asset base organically by 10% to 12% annually. This growth can be achieved through strategic acquisitions of new royalties or streams, without the high upfront costs of developing new mines themselves. Currently, the company focuses more on growth, so there isn’t a dividend yield, but this could change in the future, making it an interesting prospect for long-term investors.


Investing in royalty stocks like Freehold Royalties, Wheaton Precious Metals, and Osisko can be an excellent way to generate passive income while mitigating some of the risks associated with direct mining investments. These companies provide upfront capital to mining operations in exchange for a percentage of revenue or production, allowing investors to benefit from the profits without bearing the full brunt of operational challenges.


Each of these companies offers unique advantages, from Freehold’s focus on stable oil and gas properties to Wheaton’s emphasis on precious metals and Osisko’s growth-oriented gold royalty portfolio. By considering these royalty stocks, investors can diversify their portfolios and potentially enjoy reliable income streams.