3 High-Yield Energy Stocks to Earn Passive Income for Years

High-dividend-paying TSX stocks such as Enbridge and two others offer investors the opportunity to generate passive income in 2023.

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After a market-beating performance in 2022, energy stocks are currently trading at a lower valuation year to date. Most energy stocks trading on the TSX pay shareholders a dividend, making them attractive to income-seeking investors.

The pullback in share prices this year has driven dividend yields higher, as both have an inverse relationship. Given that oil prices are forecast to remain elevated in the next 12 months, buying energy stocks at discounted valuations seems a good strategy right now.

In addition to tasty dividend payouts, you can also benefit from capital gains in 2023 and beyond. Here are three high-yield energy stocks that can help you earn passive income for years.

Enbridge stock

One of the most popular dividend stocks in Canada, Enbridge (TSX:ENB) offers you a forward yield of 7%, as it has an annual dividend payout of $3.55 per share. The energy infrastructure giant has increased its dividend each year since 1995, making it a Dividend Aristocrat.

ENB stock has returned close to 12% annually in the last 15 years after adjusting for dividends, easily outpacing the broader indices. The company continues to invest in capital expenditures, which should drive future cash flows higher and support higher dividend payouts.

It will spend $2.4 billion on utility capital projects and gas transmission modernization. Enbridge will also allocate $240 million to build an oil terminal allowing it to store 2.5 barrels of oil on completion. It is also expected to invest $80 million in a renewable natural gas company, widening its base of clean energy assets.

The oil behemoth ended 2022 with an investment backlog of $17 billion. These asset expansion plans will enable Enbridge to expand adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) between 4% and 6% in the next three years.

Canadian Natural Resources stock

In 2022, Canadian Natural Resources (TSX:CNQ), recorded annual production of more than 1.28 million BOE/d, an increase of 4% year over year. This growth was driven by the company’s strategic investments in natural gas assets which were up 23% compared to the year-ago period.

CNQ offers shareholders exposure to a diversified base of long-life low-decline assets. Its proved reserves were up 6% at 13.587 billion BOE, replacing total production in the last year by 265%. This also provides CNQ with a reserve life index of 32 years.

In the last 12 months, Canadian Natural Resources generated adjusted funds flow of $19.8 billion, while free cash flow stood at $10.9 billion, allowing the company to pay $4.9 billion in dividends.

CNQ stock currently offers investors annual dividends of $3.60 per share, translating to a forward yield of 5.2%.

Suncor Energy stock

The final TSX energy stock on my list is Suncor (TSX:SU), which currently offers shareholders a yield of 5.2%. Suncor owns and operates four refineries enabling it to have a daily capacity of 460,000 barrels per day.  

Since March 2003, Suncor stock is up 400% after adjusting for dividends. While the energy sector is extremely cyclical, Suncor has increased dividends by 16.4% annually in the last two decades.

In the past decade, the TSX heavyweight has returned 60% of free cash flows to shareholders via dividend payouts. Suncor will invest $4.4 billion in capital expenditures this year, allowing it to expand cash flows in the near term further.

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.

Fool contributor Aditya Raghunath has positions in Enbridge. The Motley Fool recommends Canadian Natural Resources and Enbridge. The Motley Fool has a disclosure policy.

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