The energy sector is getting most of the attention in 2024. As of this writing, the top-performing sector is ahead year to date (+21.44%). One of the standout performers thus far is Cenovus Energy (TSX: CVE). The growth outlook for the $52.9 billion integrated oil & natural gas company is bright.
However, if the dividend is your primary consideration, another large-cap stock and a small-cap energy constituent have higher yields than Cenovus Energy.
Outperformer, modest dividends
Cenovus Energy’s surging production level in the fourth quarter (Q4) of 2023 and future production volume shows in the stock’s performance. In three months ending December 31, 2023, the 808,600 barrels of oil equivalent per day (boe/d) was its second-highest quarterly production ever.
However, for the full-year 2023, net earnings dropped 36.3% year over year to $4.1 billion. Still, expect Canada’s third-largest oil producer to boost production by 19% over the next five years.
When the expansion of the government-owned Trans Mountain pipeline is complete in Q2 2024, Cenovus will benefit from and have increased export pipeline capacity. At $28.52 per share, CVE is up 29.9% year to date but pays the 1.98% dividend is modest compared to two high-yield oil stocks.
Dividend Aristocrat
TC Energy (TSX: TRP) is down 4.43% year to date, but it doesn’t mean the payouts are in jeopardy. The $51.46 billion energy infrastructure company is a Dividend Aristocrat owing to 24 consecutive years of dividend increases.
Cenovus Energy suspended dividend payments in 2020 due to weak oil prices and the global pandemic. If you invest in TRP today, the share price is $48.60, while the dividend yield is 7.74%.
Management credits the high-quality asset base for the solid financial results in Q4 and full year 2023. In the three months ending December 31, 2023, net income reached $1.46 billion compared to the $1.45 billion net loss in Q4 2022. For 2023, net income soared 341.3% year over year to $2.83 billion.
TC Energy is ready to enter a transformative period with the spinoff of its liquids pipeline business and the creation of South Bow. TC Energy will maintain its regulated, low-risk, utility-like portfolio of natural gas and power businesses, while South Bow will assume the liquids transportation and storage business.
Shareholders will vote on the spinoff transaction by mid-year 2024, and it should be completed by the second half of the year. The standalone entities can pursue growth opportunities and meet demands in their respective markets.
Monthly dividends
Cardinal Energy (TSX: CJ) continues to outperform the broader market. At $6.89 per share (+12.68% year to date), the small-cap stock pays a mouth-watering 10.36% dividend. But unlike Cenovus Energy and TC Energy, the payout frequency is monthly, not quarterly. It hasn’t missed a monthly payment since February 2014.
The $1.1 billion oil and natural gas company operates in Western Canada and focuses on low-decline oil. In 2023, petroleum and gas revenue declined 20% to $589.6 million versus 2022, while earnings fell 65.77% year over year to $103.6 million.
Management said its cornerstone Reford SAGD (steam-assisted gravity drainage) project is under development. Its sanctioning will extend the reserve base and decline profile and provide 20 or more years of incremental adjusted funds flow.
Higher payouts
TC Energy and Cardinal Energy’s dividend offers are exceedingly higher than Cenovus Energy’s. Your choice would likely depend on risk tolerance and investment budget.
