There’s no shortage of great energy dividend stocks on the market for investors to consider. Some of those offer high yields that can provide a recurring income stream to kickstart an income portfolio.
For investors looking at Canadian energy stocks, the sector offers several different ways to generate that income.
Three energy dividend stocks in particular can take on that income-producing role while still offering some diversification appeal.
Here’s a look at each of them.
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Enbridge is the foundation of the group
Enbridge (TSX: ENB) is one of the larger energy infrastructure stocks on the market. The company operates one of the largest and most complex pipeline networks on the planet.
That pipeline business comprises both natural gas and crude pipelines, generating a predictable and recurring revenue stream that leaves room for growth and dividend payments.
Additionally, Enbridge operates a growing natural gas utility and a renewable energy business. Both offer similar defensive appeal wrapped in predictable cash flow generation.
Worth noting is that Enbridge’s utilities and long-term supply contracts keep the company’s revenue largely unaffected by the volatile price of oil.
From an income standpoint, Enbridge offers investors a yield of 5%. Enbridge has provided investors with annual upticks to that dividend for three consecutive decades without fail. This makes it an appealing option for investors seeking energy dividend stocks.
Enbridge also offers growth potential. The company continues to invest in new projects across its pipeline, gas transmission, utility, and renewable energy businesses. Those projects should help support further growth in its cash flow and dividend over time.
For income investors, Enbridge can serve as an anchor in this group of energy dividend stocks.
InPlay Oil offers producer upside
InPlay Oil (TSX: IPO) is another intriguing option to consider. For those unfamiliar with the stock, InPlay is a smaller oil and natural gas producer focused on the West-Central region of Alberta.
Unlike Enbridge, InPlay’s cash flow is tied more closely to fluctuating commodity prices. Strong oil and natural gas prices support its revenue, free cash flow, and ability to pay its dividend. Lower prices can put more pressure on all three.
That’s where the opportunity for investors comes into play. InPlay has worked to grow its production base over the past few years while offering an attractive monthly dividend.
As of the time of writing, InPlay’s dividend works out to a yield of 7.2%. This firmly puts the stock into the realm of ultra-high-yield energy dividend stocks.
Freehold Royalties delivers a different type of income
Freehold Royalties (TSX: FRU) is the third of the energy dividend stocks to review. The company owns royalty interests in oil and natural gas properties in Canada and the United States. Rather than operating wells itself, Freehold collects royalty revenue from the companies producing on its lands.
This gives Freehold exposure to energy prices and production activity without needing to take on the added costs of a traditional producer. That unique model also gives Freehold some diversification appeal across both properties and operators.
The company is still subject to price shifts like traditional energy producers. When commodity prices decline, that can weaken Freehold’s revenue.
In terms of income, Freehold offers investors a monthly dividend that carries a yield of 6.7% as of the time of writing.
Own these energy stocks today
No stock is without risk, and that includes the trio of energy dividend stocks mentioned above.
For those investors comfortable with some energy-sector volatility, these stocks offer three different ways to generate income within any portfolio of energy dividend stocks.
That makes them worth considering as part of a larger, well-diversified portfolio.
