The United States Federal Reserve has introduced several interest rate hikes throughout 2022 to fight sky-high inflation. The Bank of Canada (BoC) has followed suit with similar interest rate hikes. Raising interest rates from their historically low levels during the pandemic is slated to be the only viable way to bring exorbitantly high living costs under control and keep commodity prices sustainable.
Unfortunately, enacting interest rate hikes takes a long time to have a significant impact on inflation rates. The initiative has failed to make a dent so far, and further interest rates are likely to hit the economy in the coming months. Investors fear that higher interest rates can and will harm global economic growth.
Even the Canadian energy stocks have lost steam this year, despite stellar performances in the previous few quarters. Not all commodity stocks might be assets to stay away from, despite the largely uncertain outlook. The broader market pullback has also seen several high-quality energy stocks post declines on equity markets.
Lower prices mean more inflated dividend yields, and the more resilient energy stocks could be more attractive for income and growth-seeking investors at current levels. Today, I will discuss two Canadian energy stocks with oversized dividends you could consider adding to your portfolio.
Enbridge
Enbridge (TSX:ENB)(NYSE:ENB) is a $110.09 billion market capitalization giant in the Canadian energy industry. It owns and operates extensive midstream assets responsible for transporting hydrocarbons across the U.S. and Canada. The company’s pipeline network carries a significant portion of all the traditional energy products used in the U.S. and Canada, making it vital to the region’s economy.
Enbridge stock trades for $54.36 per share at writing, and it boasts a juicy 6.33% dividend yield. It is down by 8.92% from its 52-week high at current levels, and it trades at an attractive 17.99 price-to-earnings ratio. It could be a good addition to your portfolio for dividend income through inflated yields and long-term capital gains.
Keyera
Keyera (TSX:KEY) is a $6.49 billion market capitalization midstream oil and gas operator in Canada. It is one of the largest companies among its peers, providing oil and gas transportation services to producers based in Western Canada. Operating over 4,000 km of pipelines, Keyera also plays a crucial role in the Canadian economy through its midstream services.
Keyera stock trades for $29.40 per share at writing, and it boasts a juicy 6.53% dividend yield. It is down by 17.13% from its 52-week high at current levels, and it trades for an attractive 16.47 price-to-earnings ratio. Investing in its shares at current levels could help you lock in its high dividend yield and enjoy wealth growth if it recovers in the coming weeks.
Foolish takeaway
The economic condition will remain volatile in the near term, considering the persistence of the macroeconomic factors negatively affecting equity markets. Investing in dividend stocks can provide you with a degree of financial relief from the adverse impact of economic instability through regular payouts.
As commodity prices remain high, energy stocks like Enbridge and Keyera might continue enjoying greater profit margins to sustain their inflated dividend yields. However, investing in the stock market is inherently risky, especially during volatile market environments. If you can stomach near-term volatility, Enbridge stock and Keyera stock could be worthwhile additions to your investment portfolio.
