Building the Energy Dividend portfolio


By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

When it comes to sectors, energy is the most useful inflation fighter. In fact it is the only sector that has delivered positive real returns across every inflationary period, looking back some 100 years of stock market history. Energy stocks also delivered incredible returns during the stagflationary period of the 1970s and into the early 1980s. We have entered a stagflationary enviornment and (like the 70’s show) it includes an energy and commodities price shock. While I have enjoyed some very generous total returns from our energy ETFs, I am set to harvest most of those total returns, and will start building the energy dividend portfolio.

From an RBC report …

We peg free cash flow generation (before dividends) across  the Canadian majors — Canadian Natural Resources, Suncor Energy, Cenovus Energy and Imperial Oil

—at $46.0 billion in 2022 and $48.7 billion in 2023.”

The free cash flow gushers are just ridiculous. The dividends (and investors) are enriched by that free cash flow.

Here’s a Tweet thread from Larry Short that sets the table.

Yes, have a look for my “Don’t drill baby, don’t drill” reply.

You can also have a look at the quarterly update video from iA Private Wealth.

They’ve stopped drilling and now they’re filling – your brokerage account. From that very good video, Larry picks up an interesting chart from our friends at Ninepoint Partners.

You might say this is the money chart, the money shot.

Canadian energy stocks

And here is a post on Cut The Crap Investing that invited readers to consider investing in Canadian energy stocks, from October of 2020. That was about 300% ago. With even more gains available if you invested in the Ninepoint Energy Fund.

I have admitted to being late to eat my own cooking. In our accounts we have gains in the 100% to 150% range. In a TFSA account, I have sold a modest amount of shares in iShares XEG to pay our price at the pump for the next year or two. Being that I am in the semi-retirement stage with my wife being 2-5 years away from retirement, I will make that transition, selling down shares and moving the proceeds to dividend-paying stocks and specialized income-producing energy ETFs. That will take away the price risk for the energy producer sector. But certainly, the financial health of the sector and the companies is still very important. Only healthy companies (and sectors) deliver stable or growing dividends.

There is certainly recession risk, and we have already moved in a stagflationary environment. From March …

The Russcession is coming.

All said, I like the potential of more stable dividends in retirement over stable stock prices over the next year and beyond.

Be sure to check out my retirement-focused Zoom call.


And speaking of income, check out the recent GIC hikes at EQ Bank. Yes, things are getting much better for the retiree. There’s a whole bunch of GICs in the 3% to 4% range. You might embrace an EQ Bank over bonds these days. They do offer RRSP and TFSA accounts.

Building the energy dividend portfolio

Check out this post I wrote for Million Dollar Journey, investing in Canadian Dividend Energy Stocks. The readers at MDJ like their dividends, so I looked at a portfolio approach of investing in the oil and gas biggies in Canada, who usually offer some stable and growing dividends. I am in the process of updating that post. When I did some quick research, I discovered that Canadian Natural Resources, Suncor and Imperial Oil have recently increased their dividends (on average) by 85%.

  • CNQ, 0.425 to 0.75 an increase of 76.5%
  • SU, 0.21 to 0.47 an increase of 123%
  • IMO, 0.22 to 0.34 an increase of 54.5%

For many, many months I have been suggesting that the oil and gas space will be the source of the greatest dividend growth in Canada. That is playing out.

So you might build around that big energy hat trick. That is a group that has delivered some very solid and more stable total returns over the last two decades as well.

Rounding out the energy hat trick

We can add more natural gas exposure, and greater diversification. Of course none of this is advice. Here’s the greater list for consideration. Do your own additional research.

Let’s start with the big three.

Canadian Natural Resources (CNQ.TO), Suncor (SU.TO) and Imperial Oil (IMO.TO).

I then looked at iShares XEI High Dividend ETF for a few more generous payers. Plus, I checked in with a few of the Canadian energy enthusiasts on Twitter.

  • Whitecap (WCP.TO)
  • Gibson (GEI.TO)
  • Peyto (PEY.TO)
  • Topaz (TPZ.TO)
  • Freehold Royalties (FRU.TO)
  • Birchcliff (BIR.TO)
  • Cardinal (CJ.TO)
  • Tourmaline ((TOU.TO)
  • Tamarack (TVE.TO)
  • Arc Resources (ARX.TO)
  • Pinecliff (PNE.TO)

The list with dividend yield

  • Canadian Natural Resources (CNQ.TO) 3.82%
  • Suncor (SU.TO) 4.01%
  • Imperial Oil (IMO.TO) 2.12%
  • Whitecap (WCP.TO) 3.54%
  • Gibson (GEI.TO) 5.92%
  • Peyto (PEY.TO) 4.31%
  • Topaz (TPZ.TO) 4.62%
  • Freehold Royalties (FRU.TO) 6.58%
  • Birchcliff (BIR.TO) 0.80% (special dividends)
  • Cardinal (CJ.TO) 7.48%
  • Tourmaline ((TOU.TO) 1.16% (special dividends)
  • Tamarack (TVE.TO) 2.18%
  • Arc Resources (ARX.TO) 2.87%
  • Pinecliff (PNE.TO) 5.90%

Juicing the yield with ETFs

You might also look to the Ninepoint Energy Income Fund. That fund will invest in Canadian and U.S. energy dividend payers. Portfolio manager Eric Nuttall will also use some covered calls to boost the income. It’s possible the yield will increase to 8% over time.

There is also the CI Energy Giants Covered Call ETF.

You can check out Horizons Enhanced Income Energy ETF. The fees are much more favourable for HEE at 0.84% MER (management expense ratio).

The energy dividend allocation

As always, balance is key. Energy can be play an important role in the all-weather portfolio, but we certainly need to keep things in check. On the inflation-fighting front, the energy stocks might work in concert with gold and other commodities, commodity stocks and REITs.

Related post: The permanent portfolio.

I will be looking to have the energy dividends cover about 10% to 15% of the income kicked out by my RRSP portfolio. Pipelines are also in my core Canadian stock holdings. I also hold commodities. The portfolio offers some good inflation coverage. My wife’s accounts are all of the all-weather variety.

I certainly do not fear an inflationary environment, nor stagflation.

The portfolios hold bonds, cash and defensive stocks in case of market corrections and recessions. We also have a nice tech basket that was trimmed slightly over the last year and more.

I will be conducting a Zoom call on retirement and retirement funding. You can sign up here.

Thanks for reading. We’ll see you in the comment section. Are there any other energy income investments that you like? Please leave a comment.

Dale Roberts is the Chief Disruptor at A former ad guy and investment advisor, Dale now helps Canadians say goodbye to paying some of the highest investment fees in the world. This blog originally appeared on Dale’s site on May 14, 2022 and is republished on the Hub with his permission.

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