This Top Energy Stock Just Became a Canadian Dividend Champion

Imperial Oil Ltd (TSX:IMO)(NYSE:IMO) announced lower-than-expected first-quarter earnings. However, it reiterated its status as one of Canada’s top dividend stocks.

| More on:

There are generally two types of income stocks. Those with a high yield and those with a long and storied history of dividend growth. To be considered a dividend-growth company, a dividend-growth streak of five or more years is generally required.

On Friday, the company with the seventh-longest dividend-growth streak in Canada, Imperial Oil (TSX:IMO)(NYSE:IMO), released first-quarter results. The company was expected to raise dividends. Did the company deliver? Let’s take a look.

Earnings at a glance

Let’s start with the company’s first-quarter performance. It wasn’t a great quarter, and we are starting to see the impact of Alberta’s production cuts on integrated oil companies. Earnings of $0.38 missed by $0.08 and dropped almost 40% year over year. Alberta’s policy impacted the economics of crude by rail. As such, the company ceased moving oil by rail in February after increasing it to record levels in 2018.

Although the company has since resumed moving oil by rail in a limited capacity, it once again warned against the economics.

On the bright side, cash flow from operations also increased by 180 basis points over the first quarter of 2019. In total, the company generated over a billion in cash flow. This is a positive sign that supports the company’s strategy of returning cash to shareholders.

Rising dividend

Along with earnings, Imperial Oil also announced its annual dividend increase. The company raised dividends by $0.03, or 15.79%, for a new quarterly rate of $0.22 per share. It marks the 25th consecutive year of dividend growth for the company.

To put the importance of this into perspective, only five other TSX-listed companies currently have a +25-year growth streak. A 25-year dividend-growth streak is also the widely accepted milestone to officially mark a Dividend Champion.

There is no doubt that Imperial Oil is one of Canada’s premier dividend-growth companies. The company yields just over 2% and its historical dividend-growth rate has been on the rise. Not including today’s raise, its three-year dividend-growth rate hovered around 11%.

With a payout ratio in the mid-20s, there is no reason Imperial Oil cannot reward investors with continue double-digit growth in the near future.

Foolish takeaway

Imperial Oil is one of Canada’s largest integrated oil companies. This enables it to outperform the industry when the price of oil is in a bear market. Conversely, when the price of oil enjoys a bull run, the company stands to benefit in a big way.

As one of Canada’s top dividend stocks, Imperial Oil is a great choice for growth and income investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Mat Litalien has no position in any of the stocks mentioned.

More on Dividend Stocks

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »