This TFSA Stock Offers a 5.5% Yield and Reliable Regular Paycheques

Peyto is a TFSA stock well-suited for dividend income and long-term growth, as it benefits from the bullish natural gas industry today.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published April 17, 3:45 pm EDT

| More on: PEY

Key Points

• Peyto Exploration and Development Corp. (TSX:PEY) is a low-cost Canadian natural gas producer positioned to benefit from multiple macro trends including the coal-to-gas transition, grid electrification, and growing LNG demand.
• The company delivered strong Q4 results with 23% growth in funds from operations to $245M, driven by 6% production growth and a 17% increase in realized gas prices to $4.01/mcf.
• Trading at nearly $25 (up 60% in one year) and yielding 5.52%, PEY offers TFSA investors exposure to the growing global energy demand with a generous dividend backed by solid fundamentals.

Investors looking to buy dividend stocks for their TFSA have plenty of choices. However, choosing the right TFSA dividend stock involves getting to know your investment goals and risk tolerance. This can help with the hard decisions on how to best make use of your TFSA contribution limits.

With this being said, let’s take a look at a TFSA dividend stock that, in my view, has the right risk/reward balance and a strong long-term growth profile. It’s not the typical dividend stock that you hear about every day, but it’s one that’s at least worth considering.

Peyto Exploration and Development

As one of Canada’s biggest natural gas producers, Peyto Exploration and Development Corp. (TSX:PEY) has a lot going for it at this time – both on a macro level and on a company-specific level. On the macro side, the natural gas industry is in the midst of long-term secular growth that’s driven by a few factors.

The first is the ongoing global switch from coal to natural gas. The second is the electrification of the energy grid. Next is the rise in demand from data centres. And finally, we have the growing liquified natural gas (LNG) industry, which has opened up North American natural gas to the world.

On a company-specific level, Peyto is one of Canada’s lowest-cost natural gas producers. The company operates in the very lucrative deep basin of Alberta, with long-life and low-cost reserves. This helps Peyto keep costs down, and production up.

In Peyto’s most recent quarter (Q4/25), the company reported a 23% increase in funds from operations, to $245 million. This was due to a 6% increase in production, and mostly, a 17% increase in its realized natural gas price, to $4.01 per million cubic feet (mcf).

This TFSA stock carries a strong dividend yield

Over the last five years, Peyto has grown its revenue from $840 million to $1 billion. Its net earnings have grown from $152 million to $420 million. Lastly, Peyto’s operating cash flow has increased from $458 million to $858 million. This was driven by the company’s acquistion of Repsol, continued production growth, locking in higher natural gas pricing and cost savings initiatives.

Peyto’s stock price has performed well over the last year. As you can see from the above graph, it’s trading at almost $25. This means that it has appreciated more than 60% since its one-year ago price of $15.40.

As we look ahead, it is my view that Peyto’s stock price will continue to do well and that the company will continue to support a growing dividend. This is predicated on the assumption that natural gas continues to grow as it meets the ever-increasing global energy demands.

The bottom line

Peyto stock is in a great position to continue to benefit from rising global energy needs. Natural gas is taking its place as a cleaner, cheaper, and very abundant energy source that’s very much in demand across the globe.

For TFSA investors looking to maximize on their TFSA contribution limit, consider Peyto. It’s a TFSA dividend stock that pays out monthly, and it’s yielding a very generous 5.5% – backed by solid company performance and a very positive macro backdrop. This means that if you bought 1,000 shares of Peyto stock, you would receive $110 in dividend income every month. See the table below for details.