If you’re like me, you’re always looking for that investment that will you give a reliable and growing source of passive income. Thankfully, Canadian dividend stocks can provide us with this income stream. The trick is finding the right ones that will support our income needs today and in the future.
Without further ado, here are two Canadian stocks that are paying out record dividends and that offer the promise of steady and growing income.
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Canadian Natural Resources: Returning 100% of free cash flow to shareholders
The first Canadian stock that’s paying record dividends is Canadian Natural Resources (TSX: CNQ). Canadian Natural is one of Canada’s premier oil and gas companies. Its history of solid operational and financial returns simply speaks for itself.
In the five years ended December 31, 2023, CNQ’s revenue has increased 57% to $22.9 billion and its operating cash flow has increased 40% to $12.3 billion. Also, its net income has increased 52% to $8.2 billion. All of this is driven by the price of oil, which was $74 in 2023 versus $57 in 2019, as well as solid operational performance by the company.
Not surprisingly, all of this has been the backdrop which has supported record dividends from the company. In fact, as soon as Canadian Natural achieved its target debt levels, the company shifted to paying out 100% of its free cash flow to shareholders. This has meant more dividend increases in the last year, with two increases in 2024. The current dividend yield is 5.2% and with oil remaining above $70, we can expect more record dividends in 2025.
Tourmaline: Special dividends at record levels
As Canada’s largest natural gas producer, Tourmaline Oil (TSX: TOU) has been on a very profitable path.
The price of natural gas has been rising quite significantly as of late. In fact, it’s risen 5.6% so far this year and 70.5% since the end of 2023. This meant record dividends in 2024 for Tourmaline shareholders. A regular dividend of $1.40 per share in 2024 was accompanied by special dividends totalling $2 per share. This brought the company’s dividend yield to an impressive 4.9% based on today’s share price.
Looking ahead, I expect this record dividend performance from Tourmaline to continue this year. This is due to two factors. The first is the company’s stated intention to pay out the majority of its free cash flow to shareholders. The second is the company’s outlook, which is quite good, as Tourmaline is benefitting from very positive fundamentals in the natural gas industry as well as from its low-cost operations.
Liquified natural gas growth, the electrification of power, and coal switching are expected to drive natural gas prices and, therefore Tourmaline’s stock and dividend higher.
The bottom line
Canadian Natural’s quality assets, along with the company’s strong operational performance, have driven dividends to record levels. Similarly, Tourmaline’s position as the largest and lowest-cost natural gas producer has driven its dividends to record levels. Looking ahead, I think we can expect more of the same in 2025 as oil and gas prices remain strong and could be headed even higher.
