3 High-Yield TSX Energy Stocks You Can Hold for Years

3 top dividend-paying TSX energy stocks that will likely beat the markets in the long term.

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Despite inflation and rate hike woes, Canadian oil- and gas-producing companies look well-placed for decent financial growth this year. While many of them are focusing on share buybacks, higher dividends is also on the cards for some. Here are relatively stable TSX energy stocks income-seeking investors can consider.

#1 Canadian Natural Resources

Canada’s leading energy stock Canadian Natural Resources (TSX:CNQ) is well-positioned to outperform in 2023. Driven by its increased focus on shareholder returns, CNQ might create value like last year.

CNQ stock has returned 15% in the last 12 months. It offers a reliable dividend yield of 4.5%, higher than TSX stocks. The energy company has raised shareholder payouts for the last 23 consecutive years. Interestingly, CNQ raised its dividends even during the pandemic when peers suspended or trimmed.

CNQ’s higher production, coupled with relatively higher prices, will likely drive its free cash flow growth in 2023. Notably, management aims to allocate 100% of its free cash flows to share buybacks and dividends when the company reaches a net debt target of $10 billion. At the end of Q4 2022, it had net debt of $10.5 billion. Energy companies, along with CNQ, have shown admirable capital discipline since the pandemic.

CNQ stock also looks attractive from a valuation standpoint. It is currently trading at a free cash flow yield of 12%, lower than the industry average. Although it looks stretched in relative terms, CNQ deserves a premium valuation, given its scale, stable dividends, and earnings growth visibility.  

#2 Enbridge

Like energy producers, some energy pipeline companies are also attractive bets in 2023. Canadian giant Enbridge (TSX:ENB) is a dividend behemoth and yields 6.7%. Its juicy yield and dividend stability stand tall in uncertain markets.

Enbridge operates an unmatchable oil and gas pipeline network in North America. It derives a large part of its revenues from long-term, fixed-fee contracts, which facilitates stability. Unlike oil producers, energy commodity prices have little impact on pipeline companies’ earnings.

ENB stock has lost 7% in the last 12 months, notably underperforming TSX energy producer names. However, ENB has created a decent amount of shareholder wealth and returned 9% compounded annually in the last decade.

Enbridge has increased its dividends for the last 28 consecutive years. For 2023, it raised shareholder payouts by 3%. The stable dividends and earnings make it an appealing bet for long-term investors.

#3 Cardinal Energy

Canadian mid-cap energy producer Cardinal Energy (TSX:CJ) offers a juicy dividend yield of 10%, way higher than peers. It pays monthly dividends and is expected to divvy out $0.72 per share in 2023.

Cardinal Energy reported solid financial growth last year, which drove shareholder dividends. In the last 12 months, it saw free cash flows of $216 million compared to $69 million in 2021.

The company is expected to report Q4 2022 earnings on March 13. Apart from financial growth, an update on its debt position would be interesting. It is expected to reach a zero-debt target early this year, which will likely boost its focus on shareholder returns.

Although Cardinal Energy offers a premium yield, its dividend profile is relatively riskier compared to the above two. If oil prices remain supportive in the long term, CJ stock will likely create considerable shareholder value.

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 Canadian Natural Resources and Enbridge. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

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