A Canadian Dividend Pick Down 15%: A Forever Hold

This Canadian dividend stock is down about 15% from its recent highs. Insiders are not panicking, and neither should you.

It is the kind of dip that long-term investors look back on and wish they had taken more seriously. If you are hunting for a dividend stock with a legitimate growth story, Alvopetro (TSXV:ALV) deserves a place on your watchlist right now.

The bull case for this Canadian dividend stock

Most Canadian energy investors think in terms of oil sands or natural gas plays tied to Henry Hub prices. Alvopetro operates in a completely different universe.

The company sells natural gas in the state of Bahia in northeastern Brazil, piped directly into an industrial complex that consumes more gas than the entire state produces.

Because of where and how Alvopetro sells its gas, the prices it earns are extraordinary. In the first quarter of 2026, the company realized just over US$10 per thousand cubic feet (Mcf) for its gas.

That number reset in May to over US$11 per Mcf, and based on current futures pricing, it is expected to climb past US$12 per Mcf by August 1, according to President and Chief Executive Officer Corey Ruttan.

To put that in plain terms: that August price is roughly nine times what a Canadian gas producer earns and about four times what a U.S. producer gets. And then layer in an effective royalty rate of just under 7% and an income tax rate of 15% under Brazil’s Sudene fiscal regime.

The result is an operating netback margin of 84%. For context, Ruttan noted at the AGM that a Canadian peer producing three times as much volume generated 25% less funds flow from operations than Alvopetro did in a single quarter.

The dividend stock is growing its payout

Production in the first quarter of 2026 came in at over 3,100 barrels of oil equivalent per day, a new record. That is up roughly 25% over what was already a strong 2025, where full-year output averaged more than 2,500 barrels of oil equivalent per day, itself a 41% jump over the prior year.

The company just announced its second-quarter dividend of US$0.12 per share, consistent with the first quarter. Since launching dividends in the third quarter of 2021, Alvopetro has paid out more than US$2 per share in total to shareholders. The current yield sits at roughly 7.5%.

The high dividend yield is backed by an 84% operating netback margin and a disciplined capital allocation model that targets returning half of all cash flows to shareholders while reinvesting the other half in organic growth.

Beyond the existing Caburé and Murucututu natural gas fields in Brazil, Alvopetro is expanding gas plant capacity by about 20% this year and quadrupling field processing capacity at Murucututu.

A newly drilled well announced the night before the AGM showed close to 48 meters of net pay, including zones never previously included in reserve assessments.

The company also has a growing heavy oil position in Western Canada, using open-hole multilateral drilling to access the Mannville stack play across Saskatchewan. GLJ, Alvopetro’s independent reserve evaluator, pegged the existing locations’ rates of return at between 50% and well over 100% at US$70 WTI.

Management believes the Canadian dividend stock is trading at roughly 60% of proved plus probable net present values, making it a top investment in June 2026.

If you want income, Alvopetro delivers. If you want growth, Alvopetro delivers that too. It is a rare stock that earns the label “forever hold”.

The post A Canadian Dividend Pick Down 15%: A Forever Hold appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alvopetro Energy. The Motley Fool has a disclosure policy.