TFSA Investors: The Best TSX Energy Stocks for Fast-Growing Passive Income

TFSA investors can take advantage of the energy sector’s pullback in 2023 and scoop the best dividend stocks for fast-growing passive income.

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Due to declining oil prices, the energy sector isn’t as hot in 2023 as last year. However, the weakness should be temporary, and a rebound is inevitable. Tax-Free Account Savings (TFSA) investors can take advantage of or use the moment to scoop three names for fast-growing passive income. 

Diversified energy infrastructure model

AltaGas (TSX:ALA) is ripe for the picking after its exceptional business performance in 2022. The $6.44 billion company is also a solid choice for its diversified energy infrastructure model (utilities and midstream services. At $22.88 per share (-0.91% year to date), the mid-cap energy stock pays an attractive 4.96% dividend.

For the full-year 2022, normalized net income climbed 10.2% to $530 million compared to 2021. In the fourth quarter (Q4) of 2022, the midstream segment’s net income reached $113 million versus the $151 million net loss in Q4 2021. Management continues to upgrade or replace aging infrastructure in the stable utility segment.

Its president and chief executive officer (CEO) Randy Crawford said, “Our financial performance is a testament to our diversified business model.” He added the lower-risk, high-growth platform continues to demonstrate resiliency through market cycles and periods of volatility. It should provide AltaGas shareholders with steady and growing earnings and cash flow.

TSX30 winner

Birchcliff Energy (TSX:BIR), a TSX30 winner in 2022 (rank number 13), reported stellar cash flow metrics in 2022. The high-growth stock trades at a discount. At $8.12 per share, the year-to-date loss is 11.83%. The caveat for TFSA investors is the 9.91% dividend yield.

Last year was a record year for the $2.16 billion intermediate oil and gas company. Among the new record was the 111% increase in annual net income to $653.7 million versus 2021. Meanwhile, adjusted funds flow, cash flow from operations, and free funds flow rose year over year between 76% and 90.5%.

Jeff Tonken, Birchcliff’s CEO, said, “For 2023, we remain committed to generating free funds flow, delivering shareholder returns through the payment of our common share dividend and maintaining capital discipline.” He believes that Birchcliff has the flexibility to adjust its 2023 capital program if necessary.

Low price but lucrative option

Gear Energy (TSX:GXE) isn’t a top name in the sector, but its cheap price ($1.13 per share) and large dividend yield (10.43%) could attract price-conscious TFSA investors. Your $6,500 annual limit for 2023 can purchase 5,752 shares today and earn monthly dividends. Performance-wise, this small-cap stock’s total return in three years is +880.43%.

The $294.6 million oil company maximizes return on capital through a balanced model of exploration, development, and strategic acquisitions. Management expects competitive growth and a strong balance sheet by focusing on low-risk, high-rate return projects.

In 2022, net income declined 6.9% to $74.9 million versus 2021. However, funds from operations and cash flows from operating activities jumped 72.5% and 73% year over year to $93.7 million and $89.7 million. Management said 2022 was a highly successful year. Besides the net debt reduction ($13.6 million) to near zero by year-end, Gear paid $18.2 million in dividends.   

Buying opportunities

TFSA investors can count on the energy sector to regain momentum in Q2 2023, as the Organization of Petroleum Exporting Countries cut crude oil production and oil prices return to recent highs. The three energy stocks in focus are excellent buying opportunities right now.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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