Energy stocks were on an absolute tear in 2022 due to higher demand for crude and geopolitical tensions, which in turn resulted in rising oil prices. In this environment, several energy stocks reported record earnings and cash flows in 2022, allowing them to increase dividends and buybacks in the last four quarters.
Energy stocks remain an attractive bet for income-seeking investors as they offer you tasty dividends. Moreover, the best energy stocks increase these payouts consistently each year, so you can benefit from higher dividends over time.
Here are three such high-yield TSX energy stocks you can buy and hold for years.
TC Energy stock
A Canada-based pipeline giant, TC Energy (TSX:TRP) currently offers you a dividend yield of 6.7%. These payouts have risen at an annual rate of 6.9% in the last 23 years, showcasing the resiliency of the company’s business model. A majority of this diversified midstream energy company’s cash flows are regulated, enabling it to derive cash flows across business cycles.
With a payout ratio of less than 65%, TC Energy has room to lower its debt, increase dividends, and expand its base of cash-generating assets, driving future cash flows higher.
TC Energy claims it’s on track to increase earnings by 6% annually through 2026, indicating further dividend hikes are on the cards. It also aims to grow dividends between 3% and 5% annually in the near term.
Priced at 13 times forward earnings, TC Energy stock is trading at a discount of 10% to consensus price target estimates.
Brookfield Renewable Partners stock
A clean energy heavyweight, Brookfield Renewable Partners (TSX:BEP.UN) offers you a forward yield of 4.3%. In the last 10 years, BEP stock has returned 373% to shareholders after adjusting for dividends. However, BEP stock is also down 33% from all-time highs, providing an opportunity to buy the dip.
Brookfield Renewable sells the power generated from its clean energy assets to enterprises under fixed-rate power purchase agreements. These long-term contracts are also indexed to inflation.
BEP expects inflation escalation and margin enhancement to allow it to grow earnings by at least 4% annually. Further, it has a development pipeline of more than 110 gigawatts that is under development. These capital projects should increase funds from operations (FFOs) between 3% and 5% annually. BEP continues to focus on highly accretive acquisitions, resulting in an increase in FFOs by 9% each year.
As the company’s cash flows continue to expand, investors can expect the dividend payout to increase as well in 2023 and beyond.
Canadian Natural Resources stock
The final TSX stock on my list is Canadian Natural Resources (TSX:CNQ), currently yielding 4.5%. In 2022, boosted by inflation and higher commodity prices, CNQ was able to increase quarterly dividends by 45% year over year to $0.85 per share. In Q1 2023, it increased dividends by 6% to $0.90 per share, while these payouts are up 21% annually since 2000.
Canadian Natural Resources delivered record profits in 2022, providing it with enough liquidity to lower its net debt by $3.4 billion in the last four quarters. In the last two years, CNQ has reduced net debt by $11 billion, ending 2022 with net debt of $10.5 billion.
Priced at 10.5 times forward earnings, CNQ stock is trading at a discount of 13% to consensus price target estimates.