1 Canadian Energy Stock (With a +6% Dividend Yield) to Earn Monthly Passive Income

This fundamentally strong Canadian energy stock could help investors earn attractive monthly passive income.

| More on:
Oil pipes in an oil field

Image source: Getty Images.

Energy stocks in Canada are continuing to underperform the broader market in August. Continued worries about slowing economic growth amid high inflation and a rising interest rate environment are taking a toll on the oil and gas sector. These concerns also explain why West Texas Intermediate (WTI) crude oil futures prices have seen over a 6% drop in August so far after witnessing more than 7% value erosion in July.

Top Canadian stock to earn monthly passive income

Despite ongoing concerns, the medium- to long-term growth outlook for oil prices remains strong with consistently growing global demand in the post-pandemic era, which should help energy stocks recover fast in the coming months. Given that, it could be an opportunity for Canadian investors to buy some quality energy stocks on the dip to hold for the long term. Many fundamentally strong oil stocks also reward their investors with high dividends each month, which could help investors earn reliable monthly passive income with ease.

Let me highlight one of the best energy stocks — Keyera (TSX:KEY) — investors can buy right now. It currently has an impressive annual dividend yield of more than 6%.

Keyera stock’s strong monthly dividends

Keyera is a Calgary-based integrated energy infrastructure company with a market cap of about $7 billion. Despite losing 4.4% of its value to $31.73 per share in August so far, this Canadian energy stock is up by 11.2% year to date. By comparison, the TSX Composite benchmark has seen about 6% value erosion in 2022 so far.

At the current market price, Keyera’s annual dividends yield stands at 6.1%, and it distributes dividend payouts on a monthly basis. In five years between 2016 and 2021, its dividend per share has gone up by 25%, despite facing an oil industry-wide crisis during the COVID phase. In fact, the company raised its dividend payouts by around 3.8% YoY (year over year) in 2020. Overall, its well-proven track record of rewarding investors with stable dividends and its robust cash flows make it one of the most reliable Canadian stocks to buy to earn monthly passive income.

Strong fundamentals

Apart from its attractive dividends, Keyera’s outstanding post-pandemic financial recovery reflects the underlying strength in its fundamentals. As the demand for energy products started surging last year, the company registered a 65.5% YoY jump in its 2021 total revenue after it fell by 16.7% in 2021.

The strength in its financial growth trends continued in the first half of 2022. In the June quarter, Keyera’s total revenue rose by 81.7% to $1.9 billion, exceeding analysts’ estimates by around 10%. Its strong marketing segment performance also helped the company post an outstanding 169% YoY increase in its adjusted earnings for the quarter to $0.78 per share, crushing Street’s expectation of $0.52 per share.

This strong performance also encouraged the company to raise its full-year 2022 marketing segment’s realized margin guidance range to $380-$410 million from its original guidance range of $300-$340 million. I expect its strong fundamental outlook and increased guidance for 2022 to help KEY stock stage a sharp recovery in the coming months.

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.

The Motley Fool recommends KEYERA CORP. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Dividend Stocks

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »

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 »