A mid-cap stock in TSX’s energy sector is among the profitable choices for income-oriented investors in 2024. Whitecap Resources (TSX:WCP) not only outperforms the broad market (+18.76%) and its sector (+15.1%) year to date but also pays generous monthly dividends.
At $10.21 per share, current investors are winning +22.28% thus far this year and feast on the 7.08% dividend yield. If you invest today, WCP will pay a $0.72 annual dividend per share. A $10,210 investment or 1,000 shares will produce $720 yearly, or $60 monthly.
The $6.06 billion oil & liquids-weighted growth company recently reported higher profits and strong production in its latest quarter and completed a senior unsecured note offering. With the stable stock performance and reinforced financial position, today could be the best time to buy WCP.
Profitable production growth
According to management, Whitecap Resources focuses on profitable production to ensure sustainable dividends. The company boasts premium assets with a long-term organic production potential of 550,000 barrels of oil equivalent per day (boe/d). The prudent balance sheet management helps fund capital expenditures and dividend payments.
The core operations of the West division are in the Smoky and Kaybob in Fox Creek (Kaybob) and Peace River Arc. The East division operates in four regions: Central Alberta, East & West Saskatchewan, and Weyburn. Whitecap’s light oil resource is the foundation for continued growth and the source of predictable cash flows.
Financial highlights
In the nine months ending September 30, 2024, total sales (petroleum and natural gas revenues) rose 8% year over year to $2.74 million. Net income dipped 2% to $578.5 million from a year ago. However, in the third quarter (Q3) 2024, net income jumped 79.57% to $274.2 million compared to Q3 2024.
Also, in the same quarter, the average annual production increased 10% year over year to 173,302 boe/d. The total and liquids production exceeded expectations.
Whitecap adjusted its full-year average production upward to 172,500 boe/d, the third production guidance increase in 2024. Regarding shareholder returns, Whitecap paid $108 million in dividends and repurchased shares worth $117 million during the quarter.
For 2025, the board-approved capital budget is between $1.1 billion and $1.2 billion, based on an average production forecast of 176,000 to 180,000 boe/d. Whitecap is confident that the unconventional liquids-rich Montney and Duvernay plays will provide sustainable production and funds flow growth for decades.
A significant portion of the capital budget is for infrastructure. Still, free funds flow should reach $4 billion in 2029. On November 1, 2024, Whitecap closed a $400 million aggregate principal amount of senior unsecured notes offering.
The plan is to use the net proceeds to repay debt. Besides the strong financial positioning following the note offering, management will implement robust strategies to counter supply chain vulnerabilities and safeguard operational continuity.
Buy and hold
Whitecap is a buy-and-hold stock. Current shareholders are dividend and growth investors rolled into one because of the monthly income streams and price appreciation. The solid balance sheet and capital return policy, not to mention the above market average dividend yield, are among WCP’s enticements to investors.
