The TSX-listed Canadian energy stocks we’ve drill down and discovered have an average dividend payout ratio of 20%, meaning they are less likely to cut dividends if sentiment in the oil and gas sector heads south
SmallCapPower | November 6, 2019: Investors typically invest in the oil and gas producers because there is often a high dividend yield involved. However, investors could face a dividend cut if the oil & gas company is unable to generate enough income to maintain its dividend payment. Oil & gas companies are exposed to several key risks, which could lead to a miss in net income targets, including: oil price volatility, oil spills & environmental damage, and mechanical problems at oil rigs/wells, which could lead to no production for extended periods of time. However, companies with low dividend payout ratios are less likely to cut their dividend, as they are spending less of their after-tax income on dividends. Today we have dredged up four TSX-listed Canadian energy stocks that have the lowest dividend payout ratios compared with their peer group. For reference, the average dividend payout ratio of 22 TSX-listed oil and gas stocks in our peer group is 77%.
*Share price data as at November 4, 2019, data obtained from S&P Capital IQ
Encana Corporation (TSX:ECA) – $5.87
Oil and Gas
Encana is an energy producer that is focused on developing its natural gas, oil and natural gas liquids (NGLs) assets. The Company’s reserves and production are all located in North America. Encana has three main business segments: Canadian Operations, USA Operations and Market optimization. On October 31, 2019, the Company announced Q3/19 EPS of $0.15 on total production of 605.0 Mboe/d, both of which beat estimates of $0.13 and 588.2 Mboe/d. In addition, to announcing third-quarter results, Encana also said it would redomicile to United States establishing its corporate headquarters there, citing an unfavourable political climate for oil and gas companies in Canada.
- Market Cap: $7,625.8M
- 30-Day Return: +3.4%
- YTD-Return: -22.5%
- 30-Day Average Trading Volume: 7,272,940
- Dividend Payout Ratio: 7%
Frontera Energy Corporation (TSX:FEC) – $11.35
Oil and Gas
Frontera Energy is a Canada-based oil and gas company engaged in the exploration, development, and production of crude oil and natural gas primarily in Colombia and Peru. The Company’s main projects include: the Bicentenario Pipeline, a pipeline for transporting crude oil in Colombia; Puerto Bahia, which is a port development for handling and storing oil and its derivatives as well as dry bulk and general cargo and; the Los Llanos Power Transmission Line Project (PEL) and Agrocascada, a water irrigation project in Peru. On October 10, 2019, Frontera announced Q3/19 results, which were highlighted by third-quarter production of 70,082 boe/d, at the high end of management’s guidance of 65,000 to 70,000 boe/d.
- Market Cap: $1,111.8M
- 30-Day Return: -0.9%
- YTD-Return: -14.1%
- 30-Day Average Trading Volume: 140,400
- Dividend Payout Ratio: 15%
Tourmaline Oil Corp. (TSX:TOU) – $12.35
Oil and Gas
Tourmaline Oil is a Canada-based crude oil and natural gas exploration and production company focused in the Western Canadian Sedimentary Basin. The Company has assembled an undeveloped land position with a multi-year drilling inventory and operating control of natural gas processing and transportation infrastructure in three core long-term growth areas. The Company is focused on three core areas: the Alberta Deep Basin, Northeast British Columbia Montney and the Peace River Triassic Oil Complex. On July 31, 2019, Tourmaline announced H1/19 production of 286,955 boe/d and provided guidance for F2019 free cash flow (FCF) of 196.0M.
- Market Cap: $3,359.8M
- 30-Day Return: +8.0%
- YTD-Return: -25.4%
- 30-Day Average Trading Volume: 1,414,710
- Dividend Payout Ratio: 23%
Cenovus Energy Inc. (TSX:CVE) – $11.71
Oil and Gas
Cenovus Energy produces and markets crude oil and natural gas resources in Canada and the United States. The Company’s operations include oil sand projects in northern Alberta and natural gas and oil production in Alberta and British Columbia. Through a joint venture with Phillips 66, Cenovus has 50% ownership of two U.S. refineries: Wood River and Borger located in Roxana, Illinois and Borger, Texas, respectively. On October 31, 2019, Cenovus reported Q3/19 financial results, which were highlighted by adjusted funds flow per share of $0.75, above analysts estimate of $0.70 per share. Management mentioned that the Company is committed to debt reduction and is maintaining its commitment of 5% to 10% annual dividend growth.
- Market Cap: $14,389.6M
- 30-Day Return: +4.2%
- YTD-Return: +23.5%
- 30-Day Average Trading Volume: 2,670,420
- Dividend Payout Ratio: 34%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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