Oil and Gas

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The energy sector has long offered attractive dividend payouts to investors. Here’s a look at the five top Canadian oil and gas dividend stocks.

Canadian oil and gas stocks have faced a rollercoaster ride over the past few years.

However, analysts remain optimistic about the sector, and there are signs that oil and gas companies in Canada may be in a multi-year bull market. The top oil and gas stocks on the TSX and TSXV have been posting gains despite volatile market conditions, and many companies offer strong payouts for dividend investors.

Canadian energy stocks that pay dividends — a portion of corporate profits shared on a specific timeline — are attractive to those who prefer a long-term approach to wealth creation. Dividend investing allows for a steady flow of income and the opportunity to increase equity holdings, and requires stocks with high dividend yields.

The ability to offer a dividend payment is a point of pride for companies in the oil and gas industry. “The dividend yield is a financial ratio that represents the dividend income per share, divided by the price per share,” as per Investopedia. “It is considered a sign of clear financial health and confidence for a company to pay out dividends.”

The Investing News Network has compiled a list of the five top Canadian oil and gas dividend stocks using TradingView’s stock screener. Data was current as of March 1, 2022, and at that time the companies on this list had dividend yields of greater than 4 percent, as well as debt-to-equity ratios (total equity divided by total liabilities) of 0.77 or less. This ratio reflects the strength of the company’s balance sheet.

1. Orca Energy Group (TSXV:ORC.B)

Market cap: US$215.28 million; dividend yield: 7.86 percent; debt-to-equity ratio: 0.769

Orca Energy Group is an international energy company that develops, produces and sells natural gas resources in Africa, and is a major supplier of natural gas to Tanzania’s domestic energy market. The company’s main asset is the world-class Songo Songo field in Tanzania.

In February 2021, Orca Energy increased its shareholder dividend payout by 25 percent. According to Jay Lyons, interim CEO, “The dividend increase reaffirms our ongoing strategy of returning capital to shareholders through quarterly dividends and share buy backs.” In 2021, the company shelled out C$6.4 million in dividend payouts.

2. Alvopetro Energy (TSXV:ALV)

Market cap: US$148.84 million; dividend yield: 6.94 percent; debt-to-equity ratio: 0.253

Working to become an independent upstream and midstream operator in Brazil’s natural gas industry, Alvopetro Energy says its “strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of (its) Caburé natural gas field and (its) strategic midstream infrastructure.”

Alvopetro began offering shareholders quarterly dividends in September 2021. In January 2022, President and CEO Corey Ruttan declared that the company would soon commence a two well exploration program and complete its Murucututu/Gomo pipeline to enable the start of production. “I am also delighted to announce the latest increase in our gas sales price, which will be above US$10/mcf effective February 1,” Ruttan said. “This further enhances our industry-leading operating margins and supports our strategy to both re-invest cash flow into organic growth opportunities and to provide direct returns to shareholders through ongoing quarterly dividends."

3. Peyto Exploration & Development (TSX:PEY)

Market cap: US$1.83 billion; dividend yield: 5.48 percent; debt-to-equity ratio: 0.712

Next on this list of top Canadian oil and gas dividend stocks is Peyto Exploration & Development, which conducts unconventional natural gas exploration, development and production in the Deep Basin in Alberta, Canada.

Currently, Peyto pays its shareholders a monthly dividend of C$0.05 per common share; according to the company, over the past 18.5 years it has paid a total of C$19.47 per share to its shareholders in the form of distributions and dividends. “Peyto’s objective, as a dividend paying, growth-oriented corporation, is to profitably grow the resources which generate sustainable income (dividends) for shareholders,” a press release states.

4. Suncor Energy (TSX:SU,NYSE:SU)

Market cap: US$56.11 billion; dividend yield: 4.29 percent; debt-to-equity ratio: 0.51

Suncor Energy is one of Canada’s leading integrated oil and gas companies. Suncor is focused on oil sands development and upgrading in Alberta’s portion of the Athabasca Basin, offshore oil and gas production on the east coast of Canada and operations in the UK, Norway, Libya and Syria. The company refines crude oil products and distributes them under the Petro-Canada brand through retail stations located in Canada.

In October 2021, Suncor doubled its quarterly dividend on higher crude oil prices and a return to profitability.

5. Topaz Energy (TSX:TPZ)

Market cap: US$2.84 billion; dividend yield: 4.17 percent; debt-to-equity ratio: 0.23

Last on this list of top Canadian oil and gas dividend stocks is Topaz Energy. Its royalty and energy infrastructure revenue streams are generated primarily from natural gas assets operated by natural gas producers, including Canada's largest and most active natural gas producer, Tourmaline Oil (TSX:TOU,OTC Pink:TRMLF).

In March 2022, Topaz announced an 8 percent increase to its quarterly dividend, the company's third such increase since launching its dividend program in Q1 2020.

This is an updated version of an article first published by the Investing News Network in 2021.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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