The pandemic brought with it a surprise, both good and bad. While many oil stocks slashed dividends during the pandemic, they made up for the dividend cuts with strong dividend growth post-pandemic. A few Canadian stocks lead the way in the dividend space.
Post-pandemic dividend performers
Oil stocks Suncor Energy (TSX:SU) and Crescent Point Energy (TSX:CPG) fell to their multi-decade lows during the pandemic and surged 50% and 280%, respectively, from January 2021 to October 2023. This remarkable growth was led by an oil price recovery and an oil crisis after the Russia-Ukraine war began in February 2022.
The oil price jumped from US$35 to US$125, with an average price of around US$85–US$90. The high oil prices brought windfall gains to oil companies as they could sell their production for a higher price. They passed on these profits to shareholders by significantly growing their dividends.
| Year | Suncor Energy dividend/share | Change | Crescent Point Energy dividend/share | Change |
| 2023 | $2.080 | 11% | $0.487 | 60% |
| 2022 | $1.880 | 79% | $0.305 | 713% |
| 2021 | $1.050 | -4% | $0.0375 | 114% |
| 2020 | $1.095 | -35% | $0.0175 | -56% |
| 2019 | $1.680 | $0.04 |
If you invested $5,000 in each of these stocks on December 31, 2021, here’s how your portfolio would look now.
| Suncor Energy | Crescent Point Energy | |
| Stock Price Dec-31-2020 | $21.35 | $2.97 |
| No. of shares purchased in $5,000 | 234 | 1683 |
| Total Investment | $5,000 | $5,000 |
| Stock Price Dec-12-2023 | $40.17 | $8.66 |
| Capital appreciation | $4,400 | $9,574.78 |
| Total Dividend in 2 years | $926.64 | $1,334 |
| Total Investment Income | $5,327 | $10,909 |
Had you invested $5,000 on December 31, 2020, you could have purchased 234 shares of Suncor at $21.35/share. The dividend per share of $1.88 and $2.88 in the two years would have earned you $926 in total dividends on 234 shares.
With inflation easing due to reduced consumer demand, oil prices cooled. Suncor stock fell 14.5% since November. Even if you sell the stock today, you could make a total profit of $5,327 after adding capital appreciation and dividends.
Are these dividend performers a buy?
Oil is a cyclical stock, as commodity prices cannot grow beyond a limit without pulling down demand. Moreover, oil is a depleting resource as the energy industry is transitioning to greener options in the wake of climate change.
The trick to investing in such cyclical stocks is to buy at their low and sell when they are at their cyclical peak. For Suncor, the stock has a resistance at $46. But this is a cyclical peak, which is difficult to achieve unless there is a crisis. The last time Suncor crossed this price was in the 2018 crisis and the 2014 oil crisis. Thus, it is wise to sell the stock at any price above $45.
If you haven’t sold Suncor stock, you can keep holding it for dividends or sell it now and book capital appreciation. You can later buy it at the dip below $35. Similar is the case for Crescent Point Energy, which is more volatile because of its small size. While Suncor stock is still worth holding as it can sustain its dividend, Crescent Point Energy is a sell as its dividends are unstable.
Investing tip
You can consider rebalancing your portfolio by booking profits in oil stocks and reinvesting the money in telecom stocks like BCE and Telus Corporation, which are trading near their lows.
