The energy sector is going through a fluctuation period right now. Many energy stocks are slumping, though others are bullish. Ironically, our top stocks for dividends (from the energy sector) are among the ones going bullish right now.
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The pipeline giant
Enbridge (TSX: ENB) is the pipeline giant, not just in Canada but also on the entire continent. It’s one of the largest pipeline companies in the world and moves massive fractions of both natural gas and oil produced in Canada to the US.
That’s roughly 65% of all the oil being exported from Canada to the US, and its gas pipelines transport 20% of all the natural gas consumed in the US. The pipeline business itself is safer against oil price fluctuations and slumps. Enbridge’s footprint and business mix augment that strength.
From a dividend perspective, Enbridge is perhaps one of the best energy stocks Canadian investors can buy. The company has a long history of dividend growth (29 consecutive years) and offers a generous 6.3% yield. The current valuation is quite attractive as well.
A natural gas pipeline giant
Another midstream business that offers a similar mix of stability and dividends is TC Energy (TSX: TRP). Calling it a natural gas pipeline giant might be appropriate now that the company has divested from its liquid pipeline business segment. Its natural gas pipeline network is massive—93,600 km—and transports about 30% of all the natural gas consumed on the continent.
It’s also a long-standing dividend aristocrat that has raised its payouts for over two decades. The stock is bullish right now and has grown by about 28% since the beginning of the year. This has pushed the yield down, but it’s still at a relatively attractive level—5.7%. The company is financially healthy, and though the payout ratio is quite high, history suggests that the company can sustain its payouts.
A Colombian energy company
Parex Resources (TSX: PXT) is headquartered in Canada but operates solely in Colombia. It has a solid footprint in the country, and its foreign operations might be one reason it’s usually out of sync with the sector. Right now, when most producers are slumping, it’s going up. However, it’s still heavily discounted from the fall it experienced in the middle of the year (43%).
One side effect of this drop is the proportional rise of its yield, which is currently at 11%. This makes it one of the top energy stocks you can buy for dividends right now. It’s also undervalued at the moment and has a price-to-earnings of just 3.3.
Parex doesn’t have a stellar dividend history like the other two energy giants on this list. It only started paying dividends in 2021, but it has grown the payouts quite significantly since then, and the payout ratio is solid.
Foolish takeaway
All three energy stocks are worth buying and holding for their dividends but they may also reward you, at least in the short-term, with decent capital appreciation potential. Parex may experience more significant growth. Considering the fact that all three stocks are bullish right now, buying now and locking in the yields might be a smart thing to do.
