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Canada’s Big Six banks experienced a dividend bonanza in late 2021 when banking regulators lifted restrictions on dividend increases. The country’s top lenders had massive excess capital from loan loss provisions (PCLs) as the credit quality of loan portfolios did not deteriorate.
In 2022, energy companies are generating resilient free cash flows (FCF) and reporting rising earnings. Shareholder returns increase through share buybacks and dividend payments. There’s no limit to how much companies can reward investors as long as commodity prices remain high.
If you’re chasing dividends from energy stocks, Enbridge (TSX:ENB)(NYSE:ENB) and Gibson energy (TSX:GEI) are generous dividend payers. The average dividend yield is 6.085%. Assuming you invest $12,500 each, you can generate $380.31 in passive income every quarter.
Enbridge is a no-brainer because it’s the TSX’s top-rated energy stock. Brand Finance ranks the energy infrastructure company 16th among Canada’s 100 Most Valuable Brands for 2022 with sales of $112.48 billion at $55.55 per share (+17.76% year to date). ), the dividend yield is an impressive 6.19%.
The total return of 56,314.14% over 46.43 years proves that the energy stock is a long-term investment. Enbridge operates in a volatile sector, but has defensive qualities that can weather economic downturns. More importantly, its four blue-chip franchises provide essential services to the North American oil and gas midstream industry.
Businesses such as liquid pipelines, gas transportation, gas distribution and storage, and renewable energy are sources of Enbridge’s diversified cash flows. Growth is on the horizon due to the nearly $13 billion secured growth program ($3.6 billion in new projects secured).
According to management, the company has an annual capacity of $5 billion to $6 billion to fund the growth projects. Enbridge derives funds from internally generated free cash flow. With this energy stock boasting 27 straight years of dividend growth, prospective investors can expect growing income streams every year.
Pure dividend game
Gibson Energy’s size is just 3% of Enbridge, though given its 5.98% dividend offering, it’s a dividend-only game. At $24.76 per share, year-to-date earnings are up 13.76%. In the trailing 12 months, the company has paid a total of $211.37 million in dividends.
Gibson, a $3.62 billion fluid infrastructure company, has been in the same industry as Enbridge since 1950. It deals with the storage, optimization, processing and collection of liquids and refined products.
For the second quarter (Q2) of 2022, management reported net income of $35.91 million, or an increase of 11% over the second quarter of 2021. For the first half year (six months ended June 30, 2022), the Net profit up 34.9%. year-over-year to $87.88 million.
Steve Spaulding, Gibson’s President and Chief Executive Officer (CEO), said the performance of the operating segments (Marketing and Infrastructure) in the second quarter was in line with management’s expectations. Spaulding was also pleased that the Biofuels Blending Project was up and running.
For the remainder of 2022, Gibson plans to raise between $100 million and $125 million in growth capital and intends to continue with share repurchases.
Protection against inflation
Industry experts assume that oil demand and oil prices will increase until winter. Taking a position in high-yield energy stocks is one of the best options for earning passive income while providing inflation protection.