Canadian energy stocks are a popular choice for investors seeking steady dividend income. Many companies in this sector have a strong history of rewarding shareholders with consistent dividend payouts. Moreover, some have not only paid but also increased their dividends year after year, making them ideal investments for those looking to build a steady stream of passive income.
However, investors should remember that the energy sector can be cyclical and influenced by several factors, such as economic conditions, oil prices, and regulatory shifts. While energy stocks can provide passive income, a diversified portfolio is key to managing risk. It’s wise not to overexpose your investments to a single sector, no matter how strong the dividends may seem.
Against this backdrop, let’s look at top Canadian energy stocks worth considering in October.
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Energy stock #1
Investors seeking top dividend-paying companies in the energy sector could consider Canadian Natural Resources (TSX:CNQ). This oil and natural gas producer is famous for paying and increasing its dividend at a solid pace. For instance, Canadian Natural Resources has increased its dividend for 24 consecutive years. Moreover, its dividend grew at a compound annual growth rate (CAGR) of 21% during the same period.
Its solid dividend payments and growth history reflect the company’s strong financial position and management’s confidence in its future prospects.
Canadian Natural Resources’ diversified portfolio and long-life, low-decline production assets position it well to consistently grow its earnings and dividend payments. Moreover, its low reserve replacement costs and operating efficiency will enable it to generate adjusted funds flow across commodity cycles. The energy company also has a substantial inventory of low-capital projects offering attractive returns.
In summary, income investors can rely on Canadian Natural Resources stock for a growing passive income stream. Moreover, CNQ offers an attractive yield of 4.4% based on its closing price of $47.82 on October 3.
Energy stock #2
Enbridge (TSX:ENB) is a leading energy stock to buy and hold for worry-free passive income. This energy infrastructure company is famous for paying and hiking its dividend regardless of economic conditions or fluctuations in commodity prices. Moreover, it offers a high dividend yield of over 6.6%.
Notably, Enbridge has increased its dividend every year for the last 29 years. The company also raised its dividend amid the COVID-19 pandemic, when most energy companies either suspended or reduced their payouts due to lower demand and a plunge in commodity prices. This shows the resilience of Enbridge’s business model and its commitment to rewarding its shareholders with higher dividend payments regardless of market volatility.
Enbridge’s ability to deliver steady dividend growth stems from its resilient business model. The company operates an extensive pipeline network, which benefits from long-term contracts, power-purchase agreements, and regulated cost-of-service tolling frameworks. These factors provide a stable revenue base and allow Enbridge to grow its earnings, distributable cash flow (DCF), and dividends, even in volatile market environments.
Enbridge’s earnings and DCF per share are forecasted to increase by 5% in the long term. This implies that Enbridge could continue to increase its dividend by a low-to-mid-single-digit rate in the coming years.
