Investors seeking dividend income could consider energy stocks, as most companies in the energy sector have a stellar history of rewarding their shareholders with solid dividend payouts. It’s worth noting that some of the top Canadian energy companies have consistently increased their dividends for years, enabling investors to earn a growing passive income.
Against this backdrop, let’s look at top Canadian stocks from the energy sector that dividend investors could consider investing in April 2024.
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Enbridge
Speaking of top dividend-paying stocks in the energy space, Enbridge (TSX: ENB) is a compelling bet. Its ability to consistently pay and increase its dividend irrespective of the market situation shows the resiliency of its business model and payouts. For instance, the energy infrastructure giant has uninterruptedly paid dividends for about 69 years and increased them for 29 years. Moreover, its dividend has grown at a compound annual growth rate (CAGR) of 10% during the same period.
Besides a solid dividend distribution history, Enbridge offers a high yield of 7.74% (calculated on its annualized dividend of $3.66 and its closing price of $47.27 on April 11). This further supports my optimistic outlook.
Enbridge’s diversified revenue streams, backed by long-term contracts, power-purchase agreements, and regulated cost-of-service tolling frameworks, position it well to generate strong earnings and cash flows in the future. Further, investments in conventional and renewable energy assets, multi-billion secured projects, and strategic acquisitions will likely support its financials and dividend payouts.
Canadian Natural Resources
Investors could consider Canadian Natural Resources (TSX: CNQ) stock in the energy space. Like Enbridge, this crude oil and natural gas company boasts a stellar record of dividend payments. What stands out is that Canadian Natural Resources has been growing its dividend at a very high rate.
Notably, Canadian Natural Resources has increased its annual dividend for 24 consecutive years. During the same period, its dividend grew at an impressive CAGR of 21%. Meanwhile, the company increased its dividend by 24% over the past year.
The prime reason behind the company’s solid dividend payments is its ability to generate robust earnings and cash flows. CNQ’s long-life assets, high-value reserves, ability to increase production, and disciplined capital-allocation strategy enable it to generate significant free cash flows, supporting its payouts. Also, its low maintenance capital requirements and cost-control measures cushion its earnings. It pays a quarterly dividend of $1.05 per share, reflecting a yield of 3.79%.
Brookfield Renewable Partners
Brookfield Renewable Partners (TSX: BEP.UN) could be a solid addition to your income portfolio. Through the company, investors will gain exposure to the growing renewable energy sector and benefit from management’s commitment to return substantial cash to its shareholders. Its highly contracted portfolio, fixed-rate debt, and inflation-indexed revenue position it well to generate financials and support its payouts.
Investors should note that Brookfield Renewable raised its dividend at a CAGR of 6% between 2012 and 2023. Notably, the company’s funds from operations (FFO) increased at a CAGR of 12% between 2016 and 2023. Looking ahead, the commissioning of new projects, growing capacity, and a solid developmental pipeline suggest that Brookfield could continue to capitalize on the green energy shift and return higher cash to its shareholders.
The company expects to grow its dividend by 5-9% annually and maintains a sustainable payout ratio. Brookfield Renewable Partners currently offers a compelling yield of 6.38%.
