Although the S&P/TSX Composite Index has delivered an impressive return of over 12.5% this year, concerns over the impact of protectionist policies on global economic growth persist. Therefore, investors should look to strengthen their portfolios with quality dividend stocks that offer healthier yields. Meanwhile, I am bullish on the following three Canadian energy stocks, which have reliable cash flows from their operations and have rewarded their investors with consistent dividend payouts.
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Enbridge
Enbridge (TSX:ENB) would be an excellent dividend pick due to its consistent dividend growth for the last 30 years at an annualized rate of 9% and a high dividend yield of 5.8%. The diversified energy company operates a pipeline network across North America, transporting oil and natural gas under a tolling framework and long-term take-or-pay contracts. Additionally, it operates renewable energy assets backed by power-purchase agreements (PPAs) and low-risk natural gas utility assets, thereby making its financials and cash flows less prone to market volatilities.
Further, the Calgary-based company continues to invest $9–$10 billion annually to expand its asset base. Further, supported by its solid performance this year, the company was able to lower its net debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple from 5 at the beginning of this year to 4.7. Also, its healthy liquidity of $12.7 billion would support its growth initiatives, boosting its financials in the coming quarters. Meanwhile, the company’s management projects its adjusted EBITDA to grow at a 5% CAGR (compound annual growth rate) for the rest of this decade, making it an ideal buy.
Canadian Natural Resources
Another energy stock I am bullish on in this uncertain outlook is Canadian Natural Resources (TSX:CNQ), which has raised its dividend at a 21% CAGR for the last 25 years. Its diversified asset base, lower capital reinvestment, and effective and efficient operations have lowered its breakeven point, thereby driving its profitability and cash flows. These healthy cash flows have allowed it to raise its dividend consistently. Meanwhile, CNQ stock currently offers an annualized dividend payout of $2.35/share, translating into a forward dividend yield of 5.8%.
Moreover, CNQ has significant oil and natural gas reserves, with around 32 years of total proven reserve life index. Also, these reserves predominantly contain high-value SCO (synthetic crude oil), light crude oil, and NGLs (natural gas liquids). Meanwhile, the company continues to strengthen its production capabilities, with a planned capital investment of $6 billion for this year. Along with these growth initiatives, the company is also upgrading its assets and improving operating efficiency, which could boost its profitability in the coming years. Considering all these factors, I expect CNQ to continue with its dividend growth.
Northland Power
My final pick is Northland Power (TSX:NPI), which owns and operates diversified energy infrastructure assets with a total power-producing capacity of 3.5 gigawatts. It sells most of the power produced from these facilities through long-term PPAs, with the weighted average contract life of these PPAs standing at around 15 years. The company earns around 90% of its revenue from these long-term PPAs, thereby stabilizing its financials and delivering reliable cash flows. Supported by these reliable cash flows, the company has paid a dividend every month since 2018 and currently offers a forward dividend yield of 5.4%.
Moreover, NPI continues to expand its asset base and predicts its power-producing capacity to increase to six gigawatts by 2027. Amid these expansions, the company’s management expects its adjusted EBITDA to grow at a 7–10% CAGR, thereby allowing it to continue paying dividends at a healthier rate.
