The last three years have been volatile for Canadian stocks, although the energy, industrial, and mining sectors withstood the headwinds. All three sectors have positive returns thus far this year. Moreover, more than half of the 2024 TSX30 winners are oil & gas companies.
If you have the appetite to invest right now, a pair of low-priced, dividend-paying energy stocks should be on your buy list. A $500 investment in either is worth it in exchange for recurring dividends and explosive price appreciation.
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Premier economic play
Tamarack Valley Energy (TSX: TVE) has extensive holdings across Clearwater in west-central Alberta, a premier economic oil play in North America. This $2.4 billion oil & gas company completed a strategic transformation last year that paves the way to a consistent and predictable path to grow shareholder returns.
Because of solid earnings and rising cash flows, the board approved a dividend policy on October 27, 2021, and declared the first monthly dividend. Fast forward to the present, and production growth in the high-quality Clearwater asset base continues.
In the first three quarters of 2024, revenue increased by a modest 1% year over year to $1.29 billion, while net income climbed 323% to $155.83 million from a year ago. Moreover, free funds flow rose 69% to $297.7 million versus the same period in 2023. Tamarack also reduced its net debt by 28% year over year to $297.7 million.
Performance-wise, TVE is up 49.56% year to date. The overall return in five years is 181.81%, a compound annual growth rate (CAGR) of 22.98%. At only $4.44 per share, you can partake in the decent 3.38% dividend yield. The payout frequency is monthly. Based on market analysts’ 12-month average price target of $5.46, the upside potential is 18.7%.
High-growth dividend payer
Headwater Exploration (TSX: HWX) also operates in Clearwater and in McCully Field in New Brunswick. The $1.63 billion resource company explores, develops, and produces petroleum and natural gas. Its net income from operations has been consistently growing every year since 2021.
In the third quarter (Q3) of 2024, the average production increased 13% year over year to a record 20,342 barrels of oil equivalent per day (boe/d). On a year-to-date basis (nine months ending September 30, 2024, net income rose 20.5% to $139.1 million from a year ago.
According to management, the Board-approved $20 million increase to the $200 million capital plan in 2024 will continue to stabilize and add duration to corporate cash flows. Among the primary objectives are maintaining financial flexibility and deploying capital to provide shareholders with an appropriate return on investment.
As of this writing, the share price is $6.85 (+14.39% year to date), with a corresponding dividend yield of 5.84% (quarterly payouts). HWX ranked 16th in the 2023 TSX30 List, the flagship program for Canada’s top-performing stocks. The total return in five years is 930.86% (59.33% CAGR).
Superior returns
Tamarack Valley Energy is a rising star, while Headwater Exploration remains a high-growth stock contender. Regardless of the amount, your investment will reward you with superior returns (dividends + capital gains). Scoop them now before the share prices skyrocket.
