Brent and West Texas Intermediate prices jumped to multi-year highs on mid-week, the seventh day of the Russia-Ukraine war. Both benchmarks saw crude rise to US$113.36 and US$111.42 per barrel, respectively. OPEC+ members, in their meeting on the same day, ratified to increase production output by 400,000 barrels a day in April 2022.
With the additional supply coming, oil prices could stabilize or revert to pre-war levels. Thus, this month could be the tail-end of the energy bull run if the alliance of oil producers adjusts their output higher to address the crisis. According to John Kilduff, a partner at Again Capital, the war in Eastern Europe is a dramatic moment for the market, the world, and supplies.
As of this writing, the year-to-date gain of the energy sector has ballooned to 30.37%. Only three other sectors are in positive territory, while the rest of the 11 primary sectors remain in the red. The TSX is up by only +0.15% so far this year. Some analysts suggest dropping energy stocks before the rally comes to an end.
Dividend investors, however, can stay invested in the energy sector to keep earning passive income. Pembina Pipeline (TSX: PPL)(NYSE: PBA) and Suncor Energy (TSX: SU)(NYSE: SU) are dependable income providers today. Both stocks have been steady in 2022 and could sustain their high payouts to shareholders.
Portfolio of new opportunities
Pembina Pipeline reported record results for the full year 2021. Total revenue increased 44.9% to $8.62 billion versus 2020, despite the 1.3% drop in total volume. Net income reached $1.24 billion compared to the $316 million net loss in the prior year.
The energy stock trades at $45.25 per share (+19.17 year to date) and pays a lucrative 6.1% dividend. Pembina, a TSX60 Index member, has been paying dividends for 25 years. This $24.9 billion energy infrastructure company is a major player in North America’s oil & gas midstream industry.
Pembina owns diverse and integrated assets, including a vast pipeline network that serves customers in various markets and basins across the region. On March 1, 2022, management announced the formation of Newco, a potential growth driver. The new joint venture will combine the natural gas-processing assets of Pembina and KKR in Western Canada.
Cash-rich oil sands king
Suncor Energy is back on the limelight following a dismal performance and dividend cut in 2020. The oil bellwether has regained investors’ confidence due to its incredible turnaround in 2021. The stock is often heavily weighted in the top oil ETFs in Canada. It has lost its Dividend Aristocrat status but has restored the dividend yield to pre-pandemic levels.
According to management, the $56.57 billion integrated energy company exceeded its return to shareholder targets in 2021. Besides increasing dividend by 100% in Q4 2021, Suncor’s repurchase of its common shares was the highest annual rate ever in the company’s history.
Suncor reported net earnings and adjusted operating earnings of $4.11 billion and $3.80 billion in 2021 compared to net losses of $4.31 billion and $2.21 billion, respectively, in 2020. The oil sands king paid of a total of $1.6 billion in dividends last year. If you invest today, the share price is $39.52 (+26.21% year to date), while the dividend yield is 4.29%.
Cautious coalition
The production increase in April might not be enough to bring oil prices down significantly. OPEC+ remains cautious, because the group fears a repeat of the pandemic-induced slump in 2020.
