Falling oil prices in 2025 have driven shares of several energy stocks lower in recent months. However, the drawdown allows investors to gain exposure to quality energy companies at a lower multiple and benefit from a tasty dividend yield right now. In this article, I have identified two Canadian dividend stocks that are part of the energy sector you should consider holding today to benefit from outsized gains when investor sentiment improves.
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Is this TSX dividend stock undervalued?
Down 22% from all-time highs, Canadian Natural Resources (TSX:CNQ) offers you a dividend yield of almost 5%. Despite a challenging macro environment, the TSX energy giant delivered record quarterly production in the first quarter (Q1), reaching approximately 1.582 million BoE (barrels of oil equivalent) per day, including record liquids production of 1.174 million barrels per day and natural gas output of 2.451 Bcf (billion cubic feet) per day.
CNQ’s oil sands mining and upgrading operations achieved record quarterly synthetic crude oil (SCO) production of 595,000 barrels per day, a 34% increase from last year. Industry-leading SCO operating costs of $21.88 per barrel generated substantial free cash flow, with management noting their costs run $7-10 per barrel below peer averages.
The recently acquired Duvernay assets are outperforming expectations, with drilling and completion costs targeted to improve by approximately 14% compared to 2024. First quarter operating expenses in the Duvernay averaged $9.52 per BoE.
CNQ is reducing its 2025 capital budget by $100 million to $6.05 billion through operational efficiencies without impacting planned activities or production targets.
CNQ delivered $4.5 billion in adjusted funds flow and $2.4 billion in adjusted net earnings. Returns to shareholders totalled $1.7 billion, including $1.2 billion in dividends and $500 million in share repurchases. The energy heavyweight reduced net debt by approximately $1.4 billion, bringing debt-to-EBITDA to one.
The board approved a 4% increase to the quarterly dividend to $0.5875 per share, marking the 25th consecutive year of dividend increases with a compound annual growth rate of 21% over that period.
Is this TSX energy stock a good buy?
Tourmaline Oil (TSX:TOU) delivered Q1 2025 production of 638,000 BoE per day, surpassing the company’s guidance range and representing an 8% increase from last year. The Canadian natural gas producer generated $963 million in cash flow on total capital expenditures of $825 million, resulting in $150 million of free cash flow for the quarter.
Tourmaline Oil announced two strategic acquisitions in the Northeast BC Montney for approximately 13 million shares. These transactions, expected to close in June, add roughly 20,000 BoE per day of current production, 363 million BoE of 2P (proved plus probable) reserves, and approximately 410 tier-one drilling locations. Management highlighted the scarcity of high-quality inventory in North America as a key driver for these acquisitions.
Tourmaline’s board declared a special dividend of $0.35 per share in May, with plans for a quarterly dividend of $0.50 per share in June. It maintained its full-year midpoint production guidance of 645,000 BoE per day, though it expects Q2 volumes of 620,000 BoE per day as maintenance activities are shifted to capitalize on weaker pricing.
Management expects an improvement in natural gas prices during the second half of 2025 with the startup of LNG (liquified natural gas) Canada on the West Coast. The company continues to benefit from its marketing strategy, realizing an average natural gas price of $4.30 per Mcf (million cubic feet) in Q1, outperforming the peer benchmark of 2.19 per Mcf. Looking ahead, Tourmaline projects potential production growth to approximately 850,000 BoE per day by 2030.
