With so many Canadians grappling with higher mortgage payments, financial uncertainty is hitting home, literally. A new TD Bank survey reveals that 73% of Canadians renewing their mortgages in the next year expect to cut back on spending. Nearly a third are even dipping into their investments to stay afloat. It’s a sign that more people are on the hunt for reliable, long-term ways to grow their money. That’s where a stock like Vermilion Energy (TSX:VET) comes in. It’s down over 40% from 52-week highs, and it might just be the kind of undervalued gem that long-term investors should be paying attention to.
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About Vermilion
Vermilion Energy is an international oil and gas producer headquartered in Calgary. Unlike many small or mid-sized players that rely on a single region, Vermilion operates across Canada, Europe, and Australia. That geographic spread means it isn’t exposed to one specific government, regulatory regime, or market demand trend. This global presence provides diversification and helps protect it from region-specific risks.
The dividend stock has had its fair share of ups and downs, especially over the last year. The stock hit a high of $16.29 and has since tumbled to around $9.47 as of writing. That’s a drop of about 43%! But what’s interesting is what’s been happening behind the scenes. In its latest earnings report, Vermilion posted revenue of $519.6 million, up 13% from the year before. It also delivered earnings of $0.10 per share. While that did miss analyst expectations of $0.24, it was still a profitable quarter in a challenging energy environment.
Showing strength
More importantly, the dividend stock recently completed a major acquisition and a strategic divestment. It bought Westbrick Energy for $1.1 billion, massively boosting its production capacity in the Deep Basin region of Alberta. At the same time, it announced the sale of its U.S. assets for $120 million in cash. That move is expected to reduce debt while helping it focus on its most profitable operations in Canada and Europe. These actions show a company actively positioning itself for long-term success.
Vermilion also raised its 2025 production forecast to between 117,000 and 122,000 barrels of oil equivalent per day, significantly up from its previous forecast of 84,000 to 88,000. That increase comes with a drop in capital spending, cutting costs while growing output. The market hasn’t quite caught up to that story yet, which could mean the stock is undervalued.
Delicious dividend
Then there’s the dividend. Vermilion pays out $0.13 per share quarterly, which works out to a yield of about 5.5% annually. For investors looking to offset higher living costs or generate passive income, that’s a pretty attractive return. And since the dividend stock is trimming debt and focusing on efficiency, that dividend looks reasonably sustainable. Right now, a $15,000 investment would bring in about $825 in annual income!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | INVESTMENT TOTAL |
|---|---|---|---|---|---|---|
| VET | $9.47 | 1,584 | $0.52 | $823.68 | Quarterly | $14,999.48 |
Despite its recent dip, analysts remain cautiously optimistic. The average 12-month price target is $15.17, implying upside of nearly 65% from current levels. While not guaranteed, that kind of potential return, paired with the dividend, makes for a strong long-term investment case. It’s also worth noting that Vermilion’s price-to-earnings ratio is much lower than the broader market, suggesting the dividend stock is still cheap.
Bottom line
In a time when many Canadians are cutting back and reassessing their finances, investing wisely has never been more important. The TD survey shows that more people are pulling money from savings and investments to cover rising expenses. That makes every dollar you invest count even more. Vermilion Energy offers a rare mix of value, income, and recovery potential, making it a great candidate for long-term portfolios.
