Should You Buy the 3 Highest-Paying Dividend Stocks in Canada?

Three high-yield Canadian stocks are attractive for income investors but could be riskier than other dividend payers.

| More on:
Pumpjack in Alberta Canada

Source: Getty Images

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?

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Bank of Nova Scotia and Parex Resources. The Motley Fool has a disclosure policy.

More on Energy Stocks

A worker overlooks an oil refinery plant.
Energy Stocks

Best Stock to Buy Right Now: Cenovus vs Baytex?

It may not seem like a good time to buy most energy stocks, but there are always exceptions.

Read more »

A bull and bear face off.
Energy Stocks

Dividend Investors: Top Canadian Energy Stocks for November

These three dividend-payers are on a bullish uptrend.

Read more »

analyze data
Energy Stocks

Buy 8,850 Shares of This Top Dividend Stock for $2,000/Month in Passive Income

Let's do the math on what it would take to generate $2,000 a month in passive income from Enbridge (TSX:ENB)…

Read more »

oil and gas pipeline
Energy Stocks

Is TC Energy Stock a Good Buy?

TC Energy stock has a lot going for it, but there are also a few red flags to consider before…

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

Is Canadian Natural Resources Stock a Good Buy?

CNRL is an energy giant with a market capitalization near $100 billion.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Baytex Energy Stock a Good Buy?

Baytex Energy is a TSX stock that has massively underperformed the broader markets in the past decade, but it trades…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Suncor a Buy for its 4.2% Dividend?

Suncor Energy (TSX:SU) has a 4.2% yield. Is it a buy?

Read more »

engineer at wind farm
Energy Stocks

Energy Stocks to Buy Now: Top Picks for Canadian Investors

These companies have a solid business model and growing cash flows to support higher dividend payments and share prices.

Read more »