Consider Vermilion Energy for Your Portfolio

A solid name if you’re looking for more energy exposure in your portfolio.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Vermilion Energy (TSX:VET) has been around for 20 years and public for 18 of them.  Though it’s based in Canada, Vermilion has carved out a niche amongst its mid-tier peers by focusing on international growth.

Canada’s emerging global player
Vermilion isn’t the biggest oil and gas company and it isn’t the cheapest either, but its diverse production base, seasoned management team, and dividend growth potential offers a potent mix for owners of this stock.

Production growth looks bright for the next few years as new projects come online. Over the past 10 years, production at Vermilion has grown by an average of 6%. That growth has been geographically diverse as the company has acquired properties in Canada, France, Australia, and the Netherlands. In 2012 production grew by 7% to 37,803 barrels of oil per day and the company is looking at another 3%-7% addition for 2013. By early 2015 the company’s investment in a natural gas project off the coast of Ireland should start adding to production growth, too.

Growing production isn’t helpful if reserves aren’t growing to support the long-term expansion of the business. In the past decade, property acquisitions and additional exploration within those properties have allowed proved and probable reserves to grow at an 8% clip. With 80% of its production — including its Netherlands gas — tied to Brent Oil prices, Vermilion has been able to grow cash flows substantially while securing production growth for the future.

Conservatively financed, employee friendly, and Foolish
The growth potential at Vermilion looks good, but more impressive is how the board and management have balanced the needs of shareholders, employees, and the citizens in its operating areas to keep all parties happy. Directors and other insiders own 7% of the shares, with CEO Lorenzo Donadeo holding a 3.6% position.  As a group they have a clear interest in growing the business and keeping everybody motivated.

Shareholders have plenty to be happy about too. Vermilion has delivered solid cash flow growth, which has led to a steady appreciation in the shares. And, it has achieved this growth while returning a substantial amount of cash to shareholders.

Currently Vermilion shares yield 4.7%. Companies like Canadian Oil Sands (TSX:COS) and Crescent Point Energy (TSX:CPG) carry a yield of 7.1% each, therefore, Vermillion isn’t the highest yielder in the group.  However, with companies like Canadian Natural Resources (TSX:CNQ) and Suncor (TSX:SU) sporting a yield of just 1.7% and 2.6% respectively, it’s not the lowest either.  With more production coming online and a conservative use of debt, dividend hikes could be part of this company’s future.

Foolish final thoughts
Over the long-term, provided the commodity co-operates, Vermillion shareholders are likely to be handsomely rewarded with a combination of capital gains and dividend income.  A total return package from Canada’s energy patch.

Already have enough exposure to energy stocks?  Click here and we’ll send you our special FREE report that profiles 5 Canadian companies that have earned their long-term owners billions of dollars.  Not only could these 5 do the same for you, but they’ll help diversify your portfolio at the same time.  Click here if you like less risk and more reward!

Follow us on Twitter and Facebook for the latest in Foolish investing.

The Motley Fool has no positions in the stocks mentioned above.

A version of this article, authored by Nathan Parmelee, originally appeared on

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.

More on Investing

Glass piggy bank

4 Dividend Stocks to Hold in Your RRSP Forever

Inflation and volatility should spur RRSP investors to buy dependable dividend stocks like Hydro One Ltd. (TSX:H) and others right…

Read more »

protect, safe, trust
Dividend Stocks

3 Safe Stocks for Beginners Amid Rising Volatility

Given their stable cash flows and healthy growth potential, these three safe stocks are excellent buys for beginners.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

3 Cheap Bank Stocks to Buy Today

Canadians may want to snatch up top bank stocks like Bank of Montreal (TSX:BMO)(NYSE:BMO) that look undervalued today.

Read more »

calculate and analyze stock
Stocks for Beginners

Top TSX Stocks for Beginners in July 2022

Buying these top TSX stocks in July 2022 could help stock market beginners receive handsome returns on their investments in…

Read more »


Stocks, Bonds, or Real Estate: What’s the Best Way to Prepare for a Recession?

Recession worries could push investors to bonds.

Read more »

Oil pumps against sunset
Energy Stocks

How Would a Price Cap on Russian Oil Impact Canadian Energy Stocks?  

Canadian energy stocks surged in the last three days, as G7 countries proposed a plan to impose a price cap…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

3 Growth Stocks Worth Buying Today

With the volatility of the stock market, many investors continue to avoid growth stocks. However, here are three stocks worth…

Read more »

money cash dividends
Dividend Stocks

Market Correction: 2 Oversold TSX Dividend Stocks to Buy for Total Returns

These top value stocks pay attractive dividends and look cheap to buy for a TFSA or RRSP focused on total…

Read more »