Dividend Investors: 3 Top Oil Stocks Yielding Up to 9.7%

Dividend investors should be buying Suncor Energy Inc. (TSX:SU)(NYSE:SU), TransCanada Corporation (TSX:TRP)(NYSE:TRP), and Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) on the cheap.

| More on:
The Motley Fool

Oil stocks aren’t known for their generous dividends, but that might be about to change.

Outside of a few major or master limited partnerships, few energy names sport impressive yields. Drilling for oil is an expensive business, which is why energy companies are forced to plow most of their earnings back into operations.

That was true, at least, before the current downturn. The recent plunge in crude prices has knocked down the valuations on many high-quality stocks. Investors can now find juicy yields in shares of battered firms, many of which are paying out decent distributions.

Of course, there are no sure things, but bigger yields compensate investors for the extra risk. So, with this theme in mind, here are three top dividend stocks from the energy patch.

1. Suncor Energy Inc.

Suncor Energy Inc. (TSX:SU)(NYSE:SU) is hardly a hidden gem. But as the largest energy producer in the country, this company has the size and scale needed to survive the industry’s current doldrums. This is exactly the type of stock you want to own during a prolonged period of low oil prices.

Suncor stands out from its rivals in other ways, too. Over the past few years, Chief Executive Steve Williams has returned billions of dollars to investors through dividend hikes and share buybacks. It’s this sort of commitment to shareholders that has likely attracted the attention of famed value investor Warren Buffett.

2. TransCanada Corporation

While most players in the oil patch are struggling, midstream businesses like TransCanada Corporation (TSX:TRP)(NYSE:TRP) are doing just fine. Midstream is oil lingo for all of the operations involved in moving energy products from the wellhead to the refinery. However, most investors don’t understand that this tends to be the most lucrative part of the industry.

You could think of midstream firms like TransCanada as a toll road. This company charges a fee on every barrel of oil and gas that is shipped through its network, which is then funneled back to shareholders. So, no matter which direction energy prices go, TransCanada still gets paid.

3. Crescent Point Energy Corp.

Finally, Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is the most speculative name on this list. Of course, whenever you see a yield up above 9%, alarm bells should be going off. But while it’s prudent to be concerned, I don’t expect this company will cut its payout anytime soon.

Before oil started plunging, Crescent Point locked in the price for most of its future production. And while other energy producers loaded up on debt during the boom years, this company kept its balance sheet in tip-top shape. In fact, Crescent Point is now using the current doldrums to scoop up rivals on the cheap.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »