The energy sector not only makes up a large portion of the Canadian economy but also provides long-term investors with great opportunities to multiply their savings. In addition, most Canadian energy stocks reward their investors with quality dividends, which can act as a reliable source of passive income.
Even as the main TSX index remains volatile in 2023, some fundamentally strong energy stocks are continuing to outperform the index by a big margin. In this article, I’ll highlight two such dividend-paying energy stocks you can buy on the TSX today and hold as long as you want.
Headwater Exploration stock
Headwater Exploration (TSX:HWX) is my first dividend stock pick from the Canadian energy sector you can consider on the TSX today. This Calgary-based energy company currently has a market cap of $ 1.7 billion as its stock trades at $7.34 per share after rallying by 24% so far in 2023. By comparison, the TSX Composite benchmark now trades with only 3.5% year-to-date gains. At the current market price, HWX stock offers a 5.4% annualized dividend yield.
In the first nine months of 2023, Headwater’s average daily sales have gone up significantly by 45% YoY (year over year) to 17,331 barrels of oil equivalent per day with the help of consistent improvements in its daily production levels. In the third quarter alone, its average daily sales jumped 53% YoY, helping the company post strong adjusted quarterly earnings of $0.21 per share, beating analysts’ expectations by a narrow margin.
Headwater has seen extremely favourable drilling conditions this year so far, which have encouraged its management to advance some of the drilling activity planned for 2024 into the fourth quarter of 2023. While these drilling activities are likely to increase the company’s capital budget in the ongoing year, they could pay off well by increasing its production levels in the long run.
Canadian Natural stock
Canadian Natural Resources (TSX:CNQ) could be another attractive, dividend-paying Canadian energy stock for your portfolio, especially if you are a conservative investor. Canadian giant has decades of successful experience in the field of oil and natural gas production, making it a very reliable energy stock for investors who don’t want to avoid the risk of investing in new companies.
CNQ stock currently has a market cap of $97.4 billion, as it trades at $89.45 per share after rallying by 19% in 2023, outperforming the TSX index. The stock offers a decent 4.5% annualized dividend yield at this market price. But more importantly, its excellent dividend growth track record makes its stock even more attractive. Notably, the company’s dividend per share jumped by 244% in five years from $1.10 per share in 2017 to $3.78 per share in 2022.
Although recent weakness in the prices of energy products has driven its revenue down by 19% in the first three quarters of 2003, Canadian Natural’s strong financial position gives it the ability to navigate this period of economic uncertainty without much worry. With a strong long-term outlook for crude oil and natural gas prices, you can expect its financial growth trends to improve in the coming years as CNQ’s average quarterly production volumes continue to rise, making this and Canadian energy stock attractive to buy on the TSX today.