If you want cash landing in your account every month instead of every quarter, monthly dividend stocks deserve a closer look. One Canadian natural gas producer fits that bill in August 2026, with a payout backed by some of the lowest operating costs in the industry.
Peyto Exploration & Development (TSX:PEY) is a Calgary-based energy company that has built one of the more dependable income stories on the TSX.
With a current dividend yield of 5.9%, paid monthly, it is worth a closer look for anyone building a passive income portfolio.
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A Canadian natural gas stock built for income
Peyto has operated in Alberta’s Deep Basin since 1998. It is a unique geological setting where natural gas is trapped in thick, tight sandstone formations near the Rocky Mountain foothills.
Unlike many other rock formations used for shale drilling, the Deep Basin has little mobile water, which keeps completion costs down and makes production more predictable over time.
The company owns and controls almost all of its own wells, pipelines, and processing plants.
In Q2, Peyto reported controllable cash costs of $1.04 per thousand cubic feet equivalent, which includes operating, transport, interest, and general costs combined.
Peyto’s realized natural gas price of $3.42 per thousand cubic feet was more than double the average AECO benchmark price for the quarter, once adjusted for heat content.
Roughly $0.93 of that premium came from selling gas into markets outside Alberta, while another $0.85 came from the company’s hedging program.
The combination helped Peyto generate $228 million in funds from operations, or $1.11 per share, along with an adjusted earnings figure of $150 million, or $0.50 per share.
Operating margin stood at 71%, allowing the company to pay down $72 million of net debt in Q2 while raising the monthly dividend by $0.01 per share, or 9%.
CEO Jean Paul Lachance explained the company’s approach to dividend growth on the earnings call. “We’ve never paid a variable dividend, and we don’t think we get credit for a variable dividend in the market,” he said. “Any dividend increase we make will be a fixed dividend increase, and we’ll continue to do that when we’re comfortable with what forward strip presents to us.”
Reserves growth supports the monthly dividend stock story
A report published earlier this year stated that Peyto’s proved developed producing reserves rose 7% to 509 million barrels of oil equivalent, total proved reserves climbed 6% to 926 million barrels, and total proved plus probable reserves also grew 6%, reaching 1,450 million barrels.
The company added those reserves at a finding, development, and acquisition cost of just $0.94 per thousand cubic feet equivalent, its lowest figure in 23 years.
This efficiency produced a recycle ratio of 3.8 times, Peyto’s best performance in 22 years. In plain terms, Peyto earned nearly $4 in profit margin for every dollar it spent finding new gas.
Peyto also returned $265 million in dividends to shareholders in 2025 while trimming net debt by $170 million, all while investing $475 million into its drilling program.
Looking ahead, Peyto has hedged more than 500 million cubic feet a day of gas for the rest of 2026 at prices above $4 per thousand cubic feet, plus roughly 400 million cubic feet a day for 2027 at $3.30.
Combined with liquids hedges, that secures $485 million of revenue for the remainder of 2026 and $590 million for 2027, according to the company.
Should you buy this Canadian dividend stock
Peyto checks several boxes that income investors tend to look for. Its costs sit near the bottom of the industry, its reserves keep growing, and management has shown discipline around both drilling spending and shareholder payouts. The monthly cadence also makes it easier to plan around for anyone relying on their portfolio for regular cash flow.
Natural gas prices remain volatile, and that risk never fully disappears for a producer like Peyto. Still, with a hedge book that covers the bulk of 2026 and 2027, an improving debt position, and a management team focused on sustainable growth over flashy promises, Peyto looks like a monthly dividend stock worth adding to a watchlist today.
