The energy sector currently makes up a large portion of the Canadian stock market, with nearly 21.6% weightage in the TSX Composite Index by market cap. Canada’s abundant natural resources not only play an important role in the national economic growth but also provide energy companies with financial stability and resilience to navigate volatile markets. These are some of the key reasons why you may want to hold some quality Canadian energy stocks in your stock portfolio for the long term. Interestingly, most well-established energy forms in Canada also reward their investors with attractive dividends, which can act as a reliable source of passive income for years.
In this article, I’ll highlight two top dividend-paying energy stocks I find worth buying today to hold for years to come.
TC Energy stock
Like most other Canadian energy companies, TC Energy (TSX: TRP) is headquartered in Calgary. Besides its energy storage solutions, it has a large network of natural gas and liquid pipelines across North America. This top Canadian energy stock currently has a market cap of $49.4 billion as TRP stock trades at $47.39 per share after sliding by 12.2% in 2023 so far. At this market price, it offers a very attractive 7.8% annualized dividend yield.
I find TRP stock undervalued to buy for the long term, as it hasn’t seen much appreciation, despite continued strength in its recent financial growth trends. Speaking of strength, TC Energy’s total revenue rose 8.7% YoY (year over year) in the first half of 2023 to $7.8 billion due mainly to strong utilization and reliability across its assets. As a result, the company posted 2.4% YoY positive growth in its adjusted earnings for the same period to $2.17 per share.
To maximize its asset value, TRP’s board of directors recently approved the decision to spin off its liquids pipelines business as a new publicly-listed company. The planned separation of TC Energy’s two major business segments should allow both companies to grow financially faster by meeting the growing demand for their respective services, which is likely to ultimately benefit its investors.
ARC Resources stock
ARC Resources (TSX: ARX) is another top, but usually ignored, Canadian energy stock you can consider buying in 2023. This Calgary-based natural gas and crude oil producer currently has a market cap of $13.5 billion as its stock trades at $22.12 per share with strong 21.2% year-to-date gains, outperforming the broader market. In comparison, the main TSX benchmark has seen 2.3% value erosion so far this year. ARX stock has a decent 3.1% annualized dividend yield at current price levels.
One of the main reasons for driving this dividend-paying top Canadian energy stocks higher this year could be its improving earnings growth despite the volatile economic environment. Notably, ARC Resources registered a strong 35% improvement in its adjusted earnings in the first half of 2023 to $1.39 per share. With this, the company has been beating Bay Street analysts’ earnings estimates for five consecutive quarters.
As ARC remains focused on the efficient execution of its capital program and the advancement of its project pipeline, you can expect its financial growth trends to improve over the long run, making this dividend-paying Canadian energy stock really attractive to buy now.
