The best dividend stocks are those that offer you a tasty dividend yield and help you generate consistent capital gains over time. It’s crucial to identify companies that grow their dividends each year, increasing your effective yield significantly in the long term.
Here are two such Canadian dividend stocks you can consider buying in September 2023.
Innergex Renewable Energy stock
A clean energy company offering a dividend yield of 5.6%, Innergex Renewable Energy (TSX: INE) is valued at a market cap of $2.6 billion. The global shift towards renewables should act as a massive tailwind for Innergex and its peers in the next two decades, allowing investors to derive outsized gains.
Innergex Renewable has built a diversified portfolio of long-lasting assets within verticals such as hydro, wind, and solar energy. This July, it closed the construction financing of the 330-megawatt Boswell Spring project. It also closed a $66.7 million two-year non-recourse construction financing for a battery energy storage project in Chile.
Additionally, the company signed a long-term agreement with Credit Agricole Assurances, providing it with an opportunity to gain traction in France.
Innergex has close to $6 billion in total debt, which might make investors nervous due to recent interest rate hikes. But analysts expect Innergex to narrow its adjusted loss per share to $0.01 in 2023 from $0.17 per share in 2022. It’s also forecast to report adjusted earnings of $0.16 per share in 2024.
Down 60% from all-time highs, Innergex stock trades at a discount of 37% to consensus price target estimates.
Headwater Exploration stock
A company engaged in the exploration, development, and production of petroleum and natural gas, Headwater Exploration (TSX: HWX) is valued at $1.7 billion by market cap. It started paying investors a quarterly dividend of $0.10 per share in December 2022, indicating a yield of 5.5%.
In the second quarter (Q2) of 2023, Headwater Exploration achieved record production averaging 17,152 boe/d, an increase of 46% year over year. Its operating cash flows stood at $66.2 million, while net income was $31 million, or $0.13 per share, in the June quarter.
Headwater Exploration allocated $64 million towards capital expenditures in Q2 and expects to spend between $200 million and $225 million in capital projects this year.
HWX stock is up 1,000% in the last five years, as it increased sales from $9.3 million in 2019 to $458 million in 2022. It expects production growth to increase 40% this year, allowing the company to report $80 million in free cash flow.
Headwater Exploration aims to deliver market-beating gains to shareholders by focusing on its asset quality and maintaining a robust balance sheet. It is focused on expanding its cash flows by inorganic growth and strategic land acquisitions.
Analysts tracking the TSX stock expect its revenue to increase from $313 million in 2023 to $400 million in 2024. Comparatively, adjusted earnings are forecast to rise from $0.61 per share in 2023 to $1.13 per share in 2024. Priced at 6.4 times forward earnings, Headwater Exploration stock trades at a discount of 25% to consensus price target estimates.
