2 High-Yield Dividend Stocks That are Screaming Buys Right Now

Natural gas stocks like Peyto Exploration and Development are yielding above 7% today and look undervalued as natural gas strengthens.

| More on:
Trans Alaska Pipeline with Autumn Colors

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Natural gas prices have rallied 80% since their lows earlier this year. Naturally, this has given rise to strong results from natural gas producers. In this article, I’d like to highlight two producers that are very attractive high-yield dividend stocks today.

Birchcliff Energy: 7.9% dividend yield

Birchcliff Energy Ltd. (TSX:BIR) is a natural gas producer based in prolific basins in Western Canada. The company’s focus is on the Montney/Doig resource play in Alberta. This asset base is a high quality one, with a multi-decade inventory and good exposure to liquified natural gas (LNG) growth potential.

Created with Highcharts 11.4.3Birchcliff Energy PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Today, Birchcliff is yielding a very generous 7.9%. This high-yield dividend stock is backed by a strong balance sheet and strong cash flows. It’s also backed by natural gas and liquids market diversification. For example, the company has entered into a long-term butane export agreement at Altgas’ export terminal in Washington. This gives Birchcliff exposure to premium LNG pricing.

Let’s take a look at Birchcliff’s latest results (Q3/24). Production increased 1.7%, and natural gas accounted for 83% of the company’s production. While earnings and cash flow were lower than last year, this can be attributed to lower natural gas prices.

On the bright side, while the dividend was not covered by earnings, it was well-covered by cash flow. In the last five years, Birchcliff’s dividend grew at an average growth rate of 54%.

Looking ahead, Birchcliff stands to benefit from the expected strength in natural gas prices. This positive outlook is driven by the expected colder weather in the short term. In the longer term, it’s being driven by increasing LNG demand.

Peyto: 8.4% dividend yield

The other natural gas producer that’s a high-yield dividend stock right now is Peyto Exploration and Development Inc. (TSX:PEY). Peyto is currently yielding 8.4%, with strong returns and a strong balance sheet. In fact, Peyto is actually one of the lowest-cost natural gas producers in Canada.

Created with Highcharts 11.4.3Peyto Exploration & Development PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

This is because the company has top-quality assets, which can be found in one of Canada’s most prolific basins, the Alberta Deep Basin. It’s a basin that’s characterized by a high return production profile, with high recoveries and predictability. This has enabled Peyto to remain one of the lowest-cost natural gas producers, with a consistent, growing dividend.

In Peyto’s most recent quarter, production per share increased 10%. The dividend has a 43% 5-year average growth rate, and is also backed by a strong balance sheet and natural gas market diversification.

Today, Peyto’s stock is cheap. In fact, it’s trading at a mere 4.7 times cash flow and 1.1 times book value. This is despite the company’s solid operational and financial management, as evidenced in its 11.5% return on equity.

The bottom line

The high-yield dividend stocks discussed in this article are good places to start for exposure to solid returns. With the outlook for natural gas prices being boosted by LNG demand as well as a general increase in demand due to population growth and data centres, these dividend stocks stand to benefit greatly.

Should you invest $1,000 in Ishares S&p/tsx Canadian Dividend Aristocrats Index Etf right now?

Before you buy stock in Ishares S&p/tsx Canadian Dividend Aristocrats Index Etf, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Ishares S&p/tsx Canadian Dividend Aristocrats Index Etf wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Karen Thomas has a position in Birchcliff Energy and Peyto. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Energy Stocks

Investor wonders if it's safe to buy stocks now
Energy Stocks

Billionaires Might Sell U.S. Stocks and Buy This Canadian Stock to Avoid Tariff Risks

Billionaires might be worried about the future of U.S. stocks with the markets the way they are, and looking for…

Read more »

Offshore wind turbine farm at sunset
Energy Stocks

Got $500? Where I’d Invest it in This Green Energy Stock for Long-Term Sustainable Returns

This green energy company’s growing scale and focus on rewarding investors make it a top bet for investors looking for…

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

TC Energy: Buy, Sell, or Hold in 2025?

TC Energy is up 30% in the past year. Are more gains on the way?

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

Is Enbridge Stock (TSX:ENB) a Buy for its 5.9% Dividend Yield?

This solid dividend payer has the potential to help investors generate reliable passive income for decades.

Read more »

nugget gold
Dividend Stocks

Recession Stocks Are Back: Consider Buying the Dip This April

Recession stocks are back, and this one could be a solid winner.

Read more »

Person holds banknotes of Canadian dollars
Energy Stocks

Best Stock to Buy Right Now: Suncor vs Cenovus?

Suncor stock's 4.2% dividend yield vs Cenovus Energy's growth potential: Tariff-proof safety or growth gamble?

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Earn $500/Month in Tax-Free Income With Your TFSA

Canadians can earn $500 or a desired tax-free income every month by saving and investing through the TFSA.

Read more »

how to save money
Energy Stocks

1 Canadian Stock Ready to Surge in 2025 and Beyond

This Canadian stock has seen significant growth, but more could come for 2025 and beyond.

Read more »