1 Delicious Dividend Stock Down 24% to Buy and Hold Now
Written by Amy Legate-Wolfe at The Motley Fool Canada
In a year marked by falling oil prices and market uncertainty, many investors are looking for safety first. It's not just about finding the highest dividend anymore. It's about finding the ones that can weather storms and keep paying. That's why dividend stock Vermilion (TSX:VET) deserves a closer look. It's down 24% from its 52-week high yet remains one of the more solid dividend options in the Canadian energy space.
Vermilion isn't the biggest oil and gas producer in Canada, but it's one of the more diversified. It has assets not just in Alberta and Saskatchewan but also in Europe and Australia. This gives it access to premium-priced markets, particularly for natural gas, where prices in Europe tend to stay higher than in North America. That global footprint helps reduce the impact of local price swings and adds a layer of resilience.
In its most recent earnings report for the first quarter of 2025, Vermilion posted revenue of $519.6 million. That was up from $457.2 million the previous year. The dividend stock returned to profitability after a weak end to 2024, reporting net income of $14.95 million. Earnings per share (EPS) came in at $0.10. While that missed analyst expectations, it reflected better production results and lower capital spending. More importantly, it showed that the business remains operationally sound even when oil prices dip.
The dividend is what catches most investors' attention. Vermilion currently pays a quarterly dividend of $0.13 per share, or $0.52 annually.. For many income-focused investors, that's an appealing number, high enough to matter but not so high that it raises red flags. What makes it stand out is the sustainability behind it.
In March, Vermilion raised its dividend from $0.12 to $0.13 per share. That decision didn't come lightly. The dividend stock has been focused on strengthening its balance sheet, including the sale of its U.S. assets in June for $120 million. Proceeds will be used to pay down debt. That adds flexibility and lowers risk heading into the rest of the year. Right now could, therefore, be the time to buy, as a $7,000 investment could bring in $347.88 annually!
COMPANY
RECENT PRICE
NUMBER OF SHARES
DIVIDEND
TOTAL PAYOUT
FREQUENCY
TOTAL INVESTMENT
VET
$10.45
669
$0.52
$347.88
Quarterly
$6,989.05
Debt reduction has become a key theme for Vermilion, especially after years of volatility in the energy market. Its current debt-to-equity ratio is sitting at a reasonable level, and interest coverage has improved. That tells us the dividend stock has breathing room. In short, it can keep paying dividends without borrowing to do so.
What sets Vermilion apart is its disciplined approach. It doesn't overpromise, and it hasn't chased overly aggressive production targets. Instead, it focuses on free cash flow and long-term shareholder returns. When oil prices go up, it benefits. But it doesn't crumble when they fall. That's rare in the energy sector.
The dividend stock has traded in a wide range this year, from as low as $7.29 to as high as $16.29. Today, it's closer to the bottom than the top. That suggests there may be upside, particularly if oil prices stabilize or rise. Analysts covering the dividend stock have an average price target of around $13, giving the stock roughly 25% room to grow. While there are no guarantees, it shows that the market sees value in the name.
Investing in energy stocks always comes with risks. Prices are cyclical, and Vermilion is not immune to that. But with a global asset base, a reasonable yield, and a proven commitment to shareholder returns, it offers a lot to like. For investors looking for a mix of value, income, and safety, it's a dividend stock worth considering.
The post 1 Delicious Dividend Stock Down 24% to Buy and Hold Now appeared first on The Motley Fool Canada.
More reading
Made in Canada: 5 Homegrown Stocks Ready for the 'Buy Local' Revolution [PREMIUM PICKS]
Market Volatility Toolkit
Best Canadian Stocks to Buy in 2025
Beginner Investors: 4 Top Canadian Stocks to Buy for 2025
5 Years From Now, You'll Probably Wish You Grabbed These Stocks
Subscribe to Motley Fool Canada on YouTube
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.
2025
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