Category Archives: Energy Stocks

3 Tips To Improve Your Stock Returns

Are you new to stock investing or an experienced investor who wants to improve their stock returns? Here are a few tips that should help.

  • Know yourself well.
  • Know your stocks well.
  • Know the stock market well.

I will include examples to illustrate the points. 

Know Yourself Well as an Investor

Don’t know what stocks to invest in? Seek stocks that suit you in terms of your temperament and risk tolerance. You might need to test the waters to find your group of stocks.

One way to do so is by investing in a virtual account so that you won’t lose any real money if they turn south. If you can’t raise your enthusiasm from that, consider investing tiny amounts to get a feel of stock investing.

If you’re an aggressive investor and want high growth, consider growth stocks like Amazon (NASDAQ:AMZN), Alibaba (NYSE:BABA), and Tencent (TCEHY).

Conservative dividend stocks

If you’re a conservative investor, think about sticking with proven businesses. Personally, I find it’s easier to get started with dividend and value investing, which focuses on getting safe dividends and paying fair or better valuations for stocks. 

One stock I bought earlier this month that falls in this category is TC Energy (TSX:TRP)(NYSE:TRP). It is a top 15 Canadian dividend growth stock with 19 consecutive years of dividend growth. Its 10-year dividend growth rate is 7%. TRP stock is already up close to 7% from when I bought it. However, it still offers a juicy yield of almost 5.4%, which is still attractive levels.

TC Energy operates a gas and liquids pipeline and power and storage portfolio. Buying the stock at discounted valuations (such as now!) has led to double-digit long-term returns. There’s no reason that this time will be any different.

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3 Top Dividend Stocks For January 2020

Summary

  • 13 authors chose 1 top stock each for January 2020.
  • If I were to choose 3 top stocks from the group, I’d consider Enbridge, Suncor, and Stella-Jones.

Thirteen contributors at Motley Fool Canada put together a list of top Canadian stocks for January 2020. If I were to choose three top stocks from the list, it’d be Enbridge (TSX:ENB)(NYSE:ENB), Suncor Energy (TSX:SU)(NYSE:SU), and Stella-Jones (TSX:SJ).

Enbridge

Enbridge is a great income stock. If you’re looking to stash away some cash for at least five years, consider picking up some shares for a juicy yield of about 6.3%. This is way better than the interest income provided by GICs or CDs. 

A dividend growth streak of 24 years with a three-year dividend growth rate of 11.7% puts Enbridge at the top of the list for safe dividends. Although the leading North American energy infrastructure company will experience slower growth compared to the last 20 years, it will still make a decent investment with its big yield and stable growth profile. 

Enbridge anticipates growing its distributable cash flow by 5-7% over the next few years. So, it’s logical to anticipate dividend growth of about 5% per year in the foreseeable future.

The difference from Enbridge common stock and GICs or CDs, of course, is that Enbridge comes with greater volatility. That’s why investors must have a long-term investment horizon if they’re considering Enbridge. The yield on cost can grow to 8% in five years assuming a 5% dividend growth rate!

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Which Stock is More Likely to Cut its Dividend?

Vermilion Energy (TSX:VET)(NYSE:VET) and TORC Oil & Gas (TSX:TOG) are trading at multi-year lows and offer yields of 10% and 7.6%, respectively. Which is more likely to cut its dividend?

There are some things that management can’t control, such as commodity prices, and there are some things that they can control, such as capital allocation (i.e., how much cash flow to allocate for reducing debt, sustaining the business, investing in growth projects, and paying dividends).

Looking at how the companies have handled their capital allocation in the past can give an idea of which oil & gas producer will more likely cut its dividend.

Vermilion

Vermilion’s stock has maintained or increased its cash distribution or dividend every year since 2003. Since 2003, VET’s total payout ratio (which accounts for sustaining capital, growth capital, and dividend) has expanded to as high as 162%, but the company didn’t once cut the dividend.

VET places a high priority on its dividend. If history is indicative of the future, then VET will try to maintain the dividend even when the operating environment is tough.

Notably, VET doesn’t have the tendency to buy back stock like other energy companies, such as Suncor Energy (TSX:SU)(NYSE:SU) and Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ). Last year, the capital the company returned to shareholders was 100% dividends.

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