Canada’s economy is showing signs of improvement, prompting the Bank of Canada to keep its benchmark rate steady at 2.25%. The TSX posted a new record closing high of 35,416.20 following the announcement on July 15, 2026. According to BOC governor Tiff Macklem, the policymakers believe the economy is working its way through key headwinds, including geopolitical risks and ongoing trade talks.
The energy sector has been leading the surge since the war in the Middle East sparked an oil price shock. Many constituents, including small-cap stocks, are seeing robust cash flows as a result. This creates an opportunity for dividend investors seeking outsized income to take advantage of.
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High-yield play
PHX Energy Services (TSX: PHX) is a strong buy candidate right now for unbeatable income. At 10.6% per share, the dividend yield is a juicy 7.8%. A $15,331.45 investment, or 1,445 shares, will generate $300 in quarterly passive income. PHX is crushing the market, too, up nearly 49% year-to-date versus the TSX’s plus-11.7%. The energy sector’s total return thus far in 2026 is plus-33.5%.
This high-yield play is suitable for aggressive income-seekers, but a tactical holding for conservative, risk-averse investors. The company is a service provider in the Oil & Gas Drilling industry. It derives revenue from exploration companies that are vulnerable to commodity price swings. Nonetheless, the income potential in the current environment is explosive.
Business overview
The $485 million company provides horizontal and directional drilling services, which are its expertise and core business. Other major services include survey management and gyro surveying. PHX owns state-of-the-art operations facilities (servicing and manufacturing) in Calgary and Houston, Texas. It boasts a 21% and 10% market share in the home country and across the border, respectively.
Technological advancements, including the Phoenix Velocity Real-Time System and Atlas Motors, are driving business growth. PHX has reported record revenues for four consecutive years (2022-2025). In the 12 months ending December 31, 2025, excess cash flow rose 45% to almost $69 million.
Financial highlights
In Q1 2026, total revenue declined 5% to $183.9 million compared to Q1 2025 due to softer drilling activity in North America. Earnings in the quarter declined 56% year-over-year to $8.9 million because of increased depreciation and amortization expenses on drilling and other equipment.
Its President and CEO, Michael Buker, assures that PHX’s operational and financial performance has remained resilient despite a weaker industry backdrop and ongoing inflationary pressures. The company will focus on internal efficiency and allocate capital towards high-margin technologies to mitigate cost pressures.
Meanwhile, total dividend payments in Q1 2026 increased 99% to $18.1 million from a year ago. The Board approved and declared a special dividend of $0.20 per share on top of the regular quarterly dividend. Under its Return of Capital Strategy (ROCS), PHX targets returning up to 70% of excess cash flow to shareholders each fiscal year. Buker anticipates a balanced ROCS position in the second half of 2026.
Invest with caution
PHX Energy Services has reinstated its dividend program in December 2020 after the pandemic-induced energy slump. Since then, the company has sustained its quarterly payouts, leading to a special dividend this year. Investors can capture higher income but must be aware of inherent volatility and risks in the oil and gas sector.
