Sometimes the best long-term opportunities come wrapped in short-term disappointment. That’s the case with Baytex Energy (TSX:BTE), a Canadian oil and gas company that’s seen its share price fall about 47% from its 52-week high. But for investors who can handle a bit of volatility and want to build wealth over time, this could be one stock to buy and hold, possibly forever.
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The numbers
Let’s be clear: Baytex isn’t a household name. It’s smaller, more exposed to commodity swings, and has a bit of a rocky history. But that’s part of why it trades so cheaply. At recent prices, Baytex is valued at just seven times forward earnings and 0.5 times book value. That’s not just low, it’s bargain basement cheap, even in the energy sector. So, what gives?
Well, a few things. For one, oil prices have softened in 2024. These are still healthy overall, but not soaring like they were in the early days of the Russia-Ukraine war. That’s created downward pressure on many Canadian energy stocks. Second, Baytex made a major acquisition in 2023 when it bought U.S.-based Ranger Oil. The deal gave it a big footprint in the Eagle Ford shale but came with debt and execution risk. Some investors are still watching closely to see how that plays out.
But if you look under the hood, Baytex is doing just fine. In its first-quarter 2025 earnings, the dividend stock reported $464 million in adjusted funds flow, up from $424 million the previous year. Net income came in at $70 million, and Baytex generated $153 million in free cash flow. That’s the kind of money that can be used to pay down debt, reward shareholders, or reinvest in growth.
More to come
In fact, Baytex is already doing all three. It reduced its net debt to $2.2 billion, continues to buy back shares, and pays a small but growing dividend that currently yields about 3.3%. The dividend stock has also reiterated its plan to return even more cash flow to shareholders. That’s not just lip service, it’s baked into their capital-allocation strategy.
Operationally, Baytex has improved its cost structure and is pumping more efficiently than in previous years. The Ranger acquisition is starting to pay off, with production exceeding guidance and U.S. assets contributing nearly half of total output. The dividend stock now has a diverse asset base in Western Canada and the U.S., giving it more flexibility when energy prices swing.
Of course, no stock is bulletproof, especially one tied so closely to oil. Baytex will always be somewhat volatile, and earnings can fluctuate from quarter to quarter. But for long-term investors, what matters more is whether a company is profitable, disciplined, and committed to growing value over time. Baytex ticks all those boxes. And while it may never be the flashiest stock on the TSX, it doesn’t need to be.
Bottom line
The real appeal here is in the numbers, the low valuation, the strong balance sheet, a clear plan to reward shareholders, and a track record, at least in the last few years, of improving operations. As oil prices stabilize and investors rotate back into undervalued energy plays, Baytex could quietly re-rate higher. But even if it doesn’t, it offers the kind of free cash flow and long-term value creation that makes it worth holding indefinitely.
When you buy a dividend stock to hold forever, you’re looking for more than just a trade. You want something with staying power. Baytex Energy, despite the market’s current disinterest, may be exactly that. Down around 47% from recent highs and still performing well under the hood, it’s a rare case of a cheap stock that isn’t broken. For those with a long-term horizon, this could be one of the better bets in Canadian energy today.
