Income Investors: 2 Dividend Stocks With Yields of +8% and +60% Upside!

Beat the market with just the monthly dividend income of TORC Oil and Gas (TSX:TOG) and Whitecap Resources (TSX:WCP).

| More on:

The Canadian stock market has appreciated 19% year to date. There aren’t too many bargains to be found anywhere, except in the oil and gas industry. Among the best bargains in the space are TORC Oil and Gas (TSX:TOG) and Whitecap Resources (TSX:WCP), whose stocks are trading at close to half of their book values!

TORC and Whitecap are among the top five companies with the highest netbacks when compared with more than 30 other oil and gas peers, including Suncor Energy and Canadian Natural Resources.

TORC Oil and Gas

TORC has a balanced light oil asset base with sustainable growth. It earns support from the Canada Pension Plan Investment Board (CPPIB), which has a staggering stake of 29% in the company versus the insider ownership of only 4%.

The CPPIB continues to fully support the company by fully reinvesting TORC’s monthly dividend back into the business. Thanks partly to CPPIB’s 100% share-dividend participation, TORC pays about 30% less in cash dividends and would have a payout ratio of 79% based on a WTI price of US$55 per barrel. The price point will also allow TORC to have a decent net debt to cash flow of 1.4 times.

Based on its current book value of $6.77 per share, TORC has 85% upside potential. Analysts have a more conservative average 12-month price target of $5.88, which represents 61% near-term upside potential.

At $3.65 per share, TORC offers a dividend yield of 8.2% that greatly boosts returns.

Whitecap

Whitecap estimates an average production of about 71,000 barrels of oil equivalent per day this year. Despite planning to decrease its capital spending by about 8% year over year, its production is set to increase marginally in 2020.

The reduced spending will allow Whitecap to maintain a strong balance sheet with a reasonable debt to EBITDA of 1.7 times. The oil and gas producer also has oil hedges that provide some downside price protection but also upside participation for next year should oil prices head higher.

More importantly, Whitecap estimates its payout ratio to remain at about 81% to support its juicy dividend.

Based on its current book value of $7.70 per share, Whitecap has 90% upside potential. Analysts have a more conservative average 12-month price target of $6.55, which represents 61% near-term upside potential.

At $4.06 per share, Whitecap offers a hefty dividend yield of 8.4% that greatly boosts returns.

Investor takeaway

Investors who are looking for income and price appreciation and can stomach the volatility should consider TORC and Whitecap today. They offer yields of more than 8% and upside potential of more than 60%!

Recall that the average Canadian market returns are about 7% per year. So, the dividend returns will already beat the market!

Remember to size your position accordingly.

Stay hungry. Stay Foolish.

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 Kay Ng owns shares of Torc Oil And Gas Ltd. The Motley Fool recommends Torc Oil And Gas Ltd.

More on Dividend Stocks

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »

how to save money
Dividend Stocks

Got $1,000? The 3 Best Canadian Stocks to Buy Right Now

If you're looking for some cash flow from your $1,000 investment, these are the ideal investments to make.

Read more »