A record number of energy producers are distributing their excess cash in the form of dividends and buybacks in 2023. And that’s because, even if there are uncertainties in the broader markets, the oil and gas space is much better capitalized. Their earnings growth visibility and superior balance sheets make them all the more attractive in the current environment. So, TSX energy, despite being one of the most volatile sectors, will likely continue to delight investors in 2023 and beyond. Here are three such names that offer superior dividend yields
Whitecap Resources
Whitecap Resources (TSX:WCP) pays monthly dividends and currently yields 5.3%. The oil producer acquires quality acreage or companies and grows its crude oil production. For 2023, it aims to produce 161,000 barrels of oil per day, a significant 12% increase year over year. Importantly, a large part of its production is light oil, which is a premium-priced variant and facilitates superior margins.
Whitecap Resources has raised its annual dividends to $0.58 per share in 2023, handsome 32% growth year over year. Interestingly, it intends to raise them to $0.73 per share by the end of the year. So, such a steep dividend increase looks achievable for WCP given its balance sheet strength and superior earnings growth prospects. Notably, that level of dividends indicates a forward yield of 7%.
WCP stock has lost 5% in the last 12 months but has soared 700% since the pandemic crash. The stock looks fundamentally attractive, given its balance sheet strength and discounted valuation.
Enbridge
If you are looking for a less volatile option in the Canadian energy space, Enbridge (TSX:ENB) is an appealing bet. It transports oil and gas from its pipelines and thus has low correlation with oil prices.
ENB stock currently yields 6.5% and has grown shareholder payouts for the last 28 consecutive years. Irrespective of oil prices, Enbridge has delighted shareholders with its consistently growing dividends.
Enbridge operates an unmatchable pipeline network in North America, which enables stable earnings. Its operating profits have grown by 13% compounded annually in the last 15 years, indicating its consistent performance.
While many energy production stocks have soared higher in the last few years, ENB stock has been quite subdued. And that’s quite evident, given its low correlation with oil prices. However, in the last decade, ENB has returned 10% compounded annually, beating the TSX Composite Index.
Canadian Natural Resources
The country’s biggest energy producer by market cap Canadian Natural Resources (TSX:CNQ) is another name with a stable dividend profile. It yields a decent 4.5% and has increased shareholder payouts for the last 23 consecutive years. That’s highly commendable given the oil price volatility.
CNQ is expected to see stellar free cash flow growth this year as well, which will likely drive dividend growth. Moreover, CNQ has been aggressively buying back its shares, which has been contributing to shareholder returns.
Canadian Natural has low-decline, long-life reserves that are economical even when oil prices are low. Its scale and financial growth prospects will likely drive dividend growth, making it an appealing bet in the current environment.
