Got $5,000? 1 TSX Energy Stock to Turn it Into $10,000

One TSX energy stock could more than double a $5,000 investment because of robust free cash flows and soaring profits in 2022.

People make money in the stock market by buying low and selling high. But in the current investment landscape, exposure to the energy sector is highly profitable. Oil and gas companies benefit from elevated oil prices and deliver tons of profits. Also, most of the top price performers on the TSX this year are energy stocks.

Crew Energy, Obsidian Energy, and Athabasca Oil are among the high flyers. Their year-to-date gains are 122%, 121.1%, and 108.4%, respectively. It means that the money of investors who bought any of the three stocks on year-end 2021 is more than double today.

If you have $5,000 to invest right now, you can also turn it into $10,000. Aside from the names mentioned above, Vermilion Energy (TSX: VET)(NYSE: VET) is another money-making option for Canadian investors. Your advantage with this energy stock is that it’s also a dividend payer, and you can earn two ways: price appreciation and dividend payouts.

Stock performance

As of August 19, 2022, Vermilion Energy trades at $33.11 per share. The trailing one-year price return is 353%, while the year-to-date gain is 109%. Had you invested $5,000 a year ago, your money would be $22,647.06 today. Assuming you’d bought the stock on December 31, 2022, your investment is worth $10,547.99 if you sell right now.

Reinstatement of dividends

Vermilion was a known dividend payer until crude prices collapsed in 2020 due to the oil price war and the global pandemic. Management had to suspend dividend payments to preserve cash and protect the balance sheet. However, in late November 2021, it announced the reinstatement of dividends effective April 2022.

Because of the strong start to 2022, including strong free cash flow generation and continued debt reduction, Vermilion is well positioned to increase the return of capital to its shareholders. The quarterly cash dividend ($0.06 per share) payment was on April 18, 2022, and the total amount paid to shareholders represents 3% of funds flow from operations.  

Improving financial position

The financial position of the $5.43 billion international energy producer keeps improving, as evidenced by the earnings results in the second quarter (Q2) of 2022. In the three months ended June 30, 2022, petroleum and natural gas sales increased 111% to $858.84 million versus Q2 2021. Net earnings, however, declined 20% to $362.62 million.

Notably, free cash flow (FCF) grew 262% year over year to $339.75 million, while funds flow from operations jumped 162% compared to Q1 2021. The FCF of $644.27 million in the first half of 2022 is 274% higher than in the same period in 2021. As a result of the robust cash flow, Vermilion announced a 33% dividend hike for Q3 2022.

According to management, dividends will remain a key component of its return-of-capital framework. Vermilion commits to providing shareholders with a resilient and increasing base dividend.

However, it pegs the cap on the annual cash dividend to about 10% of the mid-cycle funds flow from operations. Still, would-be investors can expect a growing dividend from here on. Vermilion’s current dividend yield is 0.97%.

Double your money

Stock investments usually double over time. However, the situation in the energy sector today is quite different, and your money could double in less than a year due to elevated crude oil prices.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends VERMILION ENERGY INC.

More on Energy Stocks

A steel grain silo storage tank with solar panel in a yellow canola field in bloom in Alberta, Canada.
Energy Stocks

Here’s Why I Love Freehold Royalties (and Its Generous 6.1% Dividend Yield)

Here’s why Freehold’s royalty business, generous monthly dividend and room for long-term growth make it one of my favourite Canadian…

Read more »

oil pump jack under night sky
Energy Stocks

A 4% Dividend Stock Paying Monthly Cash

Whitecap pays about $65 monthly on a $20,000 budget, with recent cash after capital spending comfortably covering the dividend.

Read more »

financial chart graphs and oil pumps on a field
Dividend Stocks

This TSX Royalty Stock Pays Its Monthly Dividend Today: The Payout Math Behind It

Freehold pays eligible shareholders today, with a $10,000 investment offering about $52 monthly at the current dividend.

Read more »

Investor wonders if it's safe to buy stocks now
Energy Stocks

Enbridge vs. TC Energy: Which Stock Is the Better Buy?

Enbridge and TC Energy have been consistently paying and growing dividends for decades making them reliable income stocks.

Read more »

Child measures his height on wall. He is growing taller.
Energy Stocks

Down 16% and Paying 5.8%: The Case for Buying Enbridge Now

Understand how Enbridge is positioning itself in the energy sector during uncertain times with significant capital investments.

Read more »

Data Center Engineer Using Laptop Computer crypto mining
Energy Stocks

I’m Watching Hammond Power’s Backlog, Now Nearly Double Last Year’s

Hammond Power's revenue backlog is up 96.9% YoY on AI data centre demand. Here's what to watch ahead of Q3…

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

Enbridge’s $41 Billion Backlog Is Why I’m Not Selling

Here’s why Enbridge’s massive growth backlog and reliable dividend make it one of the best Canadian stocks to buy and…

Read more »

a man relaxes with his feet on a pile of books
Energy Stocks

Why I’d Rather Own Enbridge and Its $41 Billion Backlog Than Chase a Higher Yield

Discover the importance of Enbridge against the backdrop of Canada’s energy investments and its potential amidst rising infrastructure demand.

Read more »