Tag Archives: ENB

Should You Get Big Dividends from Energy Stocks?

Energy stocks can offer big dividends that are too attractive to ignore. However, investors need to look into each stock carefully, as not all energy stocks are made equal. Observing their long-term stock price charts will give a good big picture.

We’ll discuss three high-yield oil and gas producers followed by safer energy stocks for big dividends.

Can You Trust Big Dividends from Oil and Gas Producers?

TORC Oil and Gas (TSX:TOG), Surge Energy (TSX:SGY), and Vermilion Energy (TSX:VET)(NYSE:VET) offer attractive dividend yields of 7-10%. However, their underlying commodities, which experience volatile prices, have a big impact on the companies’ profitability.

oil refinery

The long-term stock price charts of the oil and gas producers illustrate how volatile the stocks can be. Although difficult to time the market, it still makes sense to aim to buy low and sell high, irrespective of what yields they offer.

For example, I once thought getting an above-average yield of 6% from Vermilion was awesome. But Vermilion now yields close to 9.5% — largely due to its stock price decline. So, instead of aiming to get a nice yield on oil and gas producers, I probably would have gotten a better outcome by aiming to buy at a low price; a high yield would just be a nice side effect.

TOG Chart

TOG data by YCharts

SGY Chart

SGY data by YCharts

VET Chart

VET data by YCharts

Generally speaking, oil and gas producers, which have increased their dividends in the last 12 months, offer safer dividends than ones that haven’t.

TORC last increased its monthly dividend by 13.6% in May 2019, Surge last increased its monthly dividend by 5.25% in June 2018, while Vermilion has kept its dividend the same over the last 12 months. Since, TORC most recently raised its dividend, its dividend is likely safer than the rest.

That said, we should also give some credit to Vermilion for having maintained or increased its dividend every year since 2003. It is the only oil and gas producer as far as I know that has achieved that. However, as shown, that doesn’t prevent its stock price from being volatile.

Vermilion’s Dividend Track Record from 2003 to 2018

The investor takeaway is: Aim to buy low and sell high for price appreciation in oil and gas producers and view getting the big dividends in between as a bonus.

For much safer dividends, consider getting big dividends from energy infrastructure companies.

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Canadian Stocks Long Ideas – December 2013

The US Dollar has been rising and rising against the Canadian. So, I’ve been looking to buy some Canadian stocks instead, although the following 2 stocks are also available for purchase on the NYSE.

Silver Wheaton

TSE:SLW $21.37 | Yield: 1.78% | Morningstar fair value estimate: $33

Silver Wheaton (SLW) signs long-term purchase agreements with mining companies. So, it is able to buy silver at the fixed cost outlined in the agreements, without having to worry about the cost and risk of running mines. Its earnings per share has still continued to increase even though the price of silver (SLV) has fallen 35% year-to-date. That’s because it has signed more agreements. Its revenue mainly comes from the sale of silver, although they sell some gold as well. Both precious metals are at their 3-year low. Analysts estimate the next 5-years of earnings growth is 20% for SLW. The demand for silver mostly comes from industrial usage, jewelry creation, and coin creation, totally accounting for 72% of demand. Other areas of demand include government purchases, producer de-hedging, and investment. If you believe the demand of silver will increase, and thus, believe its price will increase, now maybe a good time to start a position as it is bouncing off its 400-day moving average. Morningstar has a fair value estimate of $33. That is a margin of safety of 54%. Silver Wheaton serves as a capital gains play in my portfolio. I buy small positions at a time, and may sell slots of positions at resistance levels.


TSE:ENB $43.26 | Yield: 3.24% | Morningstar fair value estimate: $54

Enbridge (ENB) transports and distributes energy across Canada and the United States. It operates a crude oil and liquids transportation system. It just increased its payout by 11% (from $0.315 to $0.35 per quarter) which is inline with its recent year increases between 10 and 15%. Morningstar has a fair value estimate of $54. That’s a margin of safety of 24.8%. I believe there will be higher demand for energy in the future, and thus, I plan on holding Enbridge for the long-term for dividend and capital growth. I believe it’s a good buy around the $45 area.

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