Most yield-hungry investors have high-risk tolerance, like high-rollers in the casino. Unfortunately, chasing dividends for larger passive income streams isn’t advisable for people with lower-risk appetites or who can’t afford to lose money.
However, energy stocks PetroTal (TSX: TAL), Parex Resources (TSX: PXT), and Cardinal Energy (TSX: CJ) are too enticing to ignore. They all belong to the Oil & Gas E&P (exploration and production) industry but operate in different jurisdictions.
Should you buy these highest-paying dividend stocks in Canada even if you might be treading in risky territory?
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Peru’s largest crude oil producer
PetroTal, Houston, USA-based, is Peru’s largest crude oil producer. The $630.8 million company pays a 13.8% dividend. You can partake in the generous payouts at only $0.69 per share (-4.2% year-to-date). Given the 57.1% payout ratio, the quarterly dividends should be generally safe and sustainable.
The flagship property or anchor asset is the Bretaña oil field in the Marañon Basin of northern Peru. According to management, the conventional oil reservoir can deliver long-term profitability, notwithstanding its small environmental footprint. PetroTal intends to replicate Bretaña’s success and pursue growth opportunities in other Peruvian locations.
In the first half of 2024, oil revenue, net income, and free funds flow increased 24.4%, 30.5%, and 4.9% year-over-year respectively to US$203.7 million, US$83 million, and US$78 million. PetroTal’s President and CEO, Manuel Pablo Zuniga-Pflucker, expects robust results in Q3 and Q4 because of strong drilling activities.
Colombia-focused oil & gas producer
Parex, a $1.3 billion independent exploration and production company, engages in oil and gas production in Colombia. The energy stock pays a lucrative 11.7% dividend but trades at a deep discount. At $13.09 per share, the year-to-date loss is 44%.
The investment pitch is that the land holding (5.4 million net acres) boasts a deep portfolio with transformational exploration opportunities and growth is self-funded. However, the latest earnings results are unsatisfactory. In the first half of 2024, revenue increased 8% year-over-year to US$589.5 million, while net income decreased 68.9% to US$63.9 million.
According to Kevin Fisk, an analyst at Scotiabank Global Equity Research, the negative share price reaction is due to the lower production and free cash flow outlook, as well as the sudden resignation of Parex’s CFO.
TSX30 Winner
Cardinal Energy, a $1 billion oil and natural gas company is Western Canada-focused. The operations in four core areas have a long-term inventory of drilling locations on a conventional asset base. In the first half of 2024, revenue and earnings rose 16.6% and 30.3% year-over-year to $259.4 million and $57.4 million, respectively.
The financial results thus far in 2024 reflect the stock’s performance. At $6.43 per share, current investors enjoy a 10.8% year-to-date gain on top of the outsized 11.1% dividend yield. Cardinal Energy’s payout frequency is monthly, not quarterly, unlike other dividend payers.
Moreover, this small-cap stock is among the 30 top-performing TSX stocks. Cardinal Energy ranked 29th in the 2024 TSX30 List, owing to a 134% increase (dividend-adjusted share price) in three years.
Obvious choice
Cardinal Energy is the better choice among Canada’s three highest-paying dividend stocks. Besides being a TSX30 winner, you can purchase this dividend titan at less than $10 per share and receive passive income monthly.
