Is Tamarack Valley the Best Under-$5 Monthly Dividend Stock in Canada Today?

Despite its recent correction, TVE stock is continuing to outperform the broader market by a wide margin in 2022.

| More on:

Image source: Getty Images

Shares of Tamarack Valley Energy (TSX:TVE) have largely been trading on a negative note for the last three months due mainly to a correction in the prices of energy products. Notably, West Texas Intermediate (WTI) crude oil futures prices have seen more than a 20% downside correction in the last three months. This weakness has pressured most TSX energy stocks lately, including TVE stock.

Nonetheless, I still find Tamarack Valley stock worth buying on the dip for the long term, which pays monthly dividends and currently trades under $5 per share. Before I explain why, let’s take a closer look at its business overview and recent stock price movement.

Tamarack Valley Energy stock price movement

Tamarack Valley Energy is a Calgary-based oil and natural gas producer with a market cap of $1.9 billion. While TVE stock continues to outperform the market with its 11% year-to-date gains, it has dived by 16.6% in the last three months to $4.27 per share. By comparison, the TSX Composite Index has seen a 6.4% value erosion in 2022.

At the current market price, Tamarack stock has a decent dividend yield of around 2.8%, and the company distributes its dividend on a monthly basis. This Canadian energy company primarily focuses on low-risk oil development drilling locations with the help of its diverse multi-play asset portfolio. It aims to achieve a 39% emission intensity reduction by 2025.

In 2020, like most other energy companies, Tamarack Valley faced operational challenges due to COVID-19-related restrictions. This factor, along with the sharp decline in the demand and prices for energy products, took its total revenue for the year down by 27% YoY (year over year) to $224.4 million.

Nonetheless, the company posted a spectacular financial recovery the next year with a much sharper than expected recovery in oil and gas demand and prices, along with its rising production. In 2021, Tamarack Valley’s total revenue stood at $524.9 million, up 134% compared to the previous year. Similarly, its adjusted earnings for the year jumped by 640% YoY to $1.08 per share, crushing analysts’ estimate of around $0.83 per share.

Tamarack Valley is continuing to maintain this strong growth trend in the ongoing year. In the June quarter, the energy company reported a 151% YoY rise in its revenue to $328.9 million with the help of a 35% increase in its quarterly production volumes. This higher production and strong price environment also drove its second-quarter adjusted earnings up by 450% YoY to $0.33 per share, beating Street’s estimate of around $0.23 per share by more than 40%.

Bottom line

Tamarack Valley Energy’s accelerating financial growth trends have encouraged it to initiate share buybacks and increase dividends per share in recent months. In June, the company closed the acquisition of Rolling Hills Energy for total net consideration of its 9.3 million common shares and $46.5 million in cash. With this deal, Tamarack Valley expects to realize synergies in gas conservation and other infrastructure projects, which should help accelerate its financial growth in the coming years.

These positive factors make TVE stock worth buying amid the ongoing correction and one of the best Canadian monthly dividend stocks to buy for under $5 per share.

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 has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Dividend Stocks

Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

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

We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

Yield Today, Growth Tomorrow: 3 Stocks to Keep Building Your Wealth

For investors seeking yield today and growth tomorrow, these top Canadian dividend stocks are certainly worth considering right now.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 10.72% Dividend Stock Pays Cash Every Month

This dividend stock remains a consistent, defensive dividend producer that will give up over 10% in income each and every…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Despite their recent declines, the long-term growth outlook of these two top dividend stocks remains strong, which could help their…

Read more »