1 Canadian Energy Stock With a Dividend I Trust

Buying on a dip is probably one of the most satisfying things an investor can do. Yet that satisfaction rises even higher when investing in a solid company that’s been up for the past year, and offers income to boot.

That’s why today, we’re looking at one energy company that might be up about 50% year to date but is currently down about 16% since its 52-week high. That leaves a solid chance to get in on a  3.2% dividend yield before it rises once more. So, let’s get into why this dividend stock could be one worth buying during a turnaround.

VET

Vermilion Energy (TSX:VET) is a Calgary-based oil and gas producer with operations in North America, Europe, and Australia. The dividend stock focuses heavily on natural gas, with liquids-rich gas assets in Canada and conventional gas exposure in Europe. That international exposure gives it access to stronger gas pricing in certain markets.

Yet over the last year, Vermilion made a major portfolio shift. The dividend stock acquired Westbrick Energy for $1.075 billion, strengthening its position in Alberta’s Deep Basin and adding gas-weighted production. The deal would add about 50,000 barrels of oil equivalent per day (boe/d), with production made up of about 75% gas and 25% liquids.

But that’s not all! Vermilion sold its U.S. assets for $120 million, using proceeds to repay debt and focus on core gas-weighted assets in Canada and Europe — all while cutting its 2025 capital budget by a whopping $100 million.

Into earnings

So, it’s no wonder earnings painted such a promising picture. The first quarter of 2026 made the income case for this dividend stock even stronger. Vermilion generated $232 million in fund flows from operations (FFO), or $1.52 per basic share. It also generated $98 million in free cash flow (FCF) after funding $135 million of exploration and development capital spending. Furthermore, it returned $27 million to shareholders in Q1 through dividends and buybacks, including $21 million in dividends and the repurchase of 400,000 shares.

Now, let’s be clear, it wasn’t all perfection. Vermilion reported a Q1 net loss of $146 million, or $0.95 per basic share. However, that loss came mainly from a $286 million unrealized loss on derivative instruments tied to higher spot and forward oil and European gas prices. That’s why fund flows and free cash flow tell a clearer story for dividend investors, which reached $1.01 billion.

Looking ahead

So, is it worth buying after all this growth and during a dip? Well, the numbers speak for themselves. It currently trades at a reasonable 25 times earnings and 1.2 times book value, with investors waiting for its acquisitions to kick in. Meanwhile, management has been responsible with shareholder cash, keeping that dividend reliable in the meantime.

The future outlook rests on three things: gas pricing, debt reduction, and portfolio quality. Vermilion expects Q2 2026 production of 123,000 to 125,000 boe/d, with full-year production trending toward the top end of its 118,000 to 122,000 boe/d guidance range. That suggests the Westbrick integration and Canadian drilling results are helping. But for now, investors could grab the dividend stock and receive ample income even with $7,000 invested.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTVET$17.14408$0.54$220.32Quarterly$6,993.12

Bottom line

It’s true that a dip can be a scary thing sometimes, and Vermilion Energy isn’t the safest, steadiest dividend stock out there. After all, energy stocks always carry some commodity risk.

However, with a 3.3% yield, stronger production, debt reduction, and an acquisition in play, this dividend stock looks ideal for investors who want income with energy upside.

The post 1 Canadian Energy Stock With a Dividend I Trust appeared first on The Motley Fool Canada.

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More reading

• 3 Canadian Stocks to Buy Before Oil Volatility Returns
• TSX Today: What to Watch for in Stocks on Thursday, May 7
• 2 TSX Stocks That Could Win Big From Oil Near $100
• 1 Canadian Energy Stock That May Be Quietly Setting Up for a Strong Year

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Vermilion Energy. The Motley Fool has a disclosure policy.