GEI:CC - 1 Dividend Stock to Buy With Incredible Long-Term Potential

2023-04-30 10:30:00 ET

Holding some quality dividend stocks in your portfolio always pays off well in the long run. While short-term macroeconomic uncertainties may significantly increase the volatility in high-growth stocks , dividend stocks usually tend to be relatively stable, even in a difficult economic environment, and help you earn handsome passive income.

In this article, I’ll talk about one attractive dividend stock in Canada with incredible long-term upside potential you can buy today and hold forever.

An attractive dividend stock to buy in Canada now

One of the most important things you need to look at while picking a dividend stock is its long-term fundamental outlook and financial position. This guideline will help you filter out weak stocks that could potentially increase your risk profile.

Keeping that in mind, Gibson Energy ( TSX:GEI ) could be worth considering in 2023. This Calgary-headquartered energy company primarily focuses on providing storage and processing infrastructure for crude oil and related refined products. Gibson currently has a market cap of $3.2 billion, as its stock trades at $22.25 per share with about 6% year-to-date losses. It distributes its dividend payouts every quarter and offers an attractive annualized dividend yield of around 7% at the current market price.

Now, let’s take a closer look at some key factors that make GEI a great Canadian dividend stock to invest in for the long term.

Key positive factors

In 2020, prices of energy products nosedived on demand concerns amid COVID-19-related shutdowns, which badly hurt the long-term financial growth trends of most energy companies. However, that was not the case with Gibson Energy. Despite facing global pandemic-related challenges in between, its revenue jumped 81% in the five years between 2017 and 2022 to $11 billion. During the same five years, the energy firm’s adjusted earnings posted an outstanding growth of 617% to $1.50 per share with improved margins.

Besides that, Gibson has been increasing its dividends for the last four consecutive years, reflecting its management’s commitment to reward its loyal investors even in tough economic times.

In the last seven to eight years, Gibson Energy has actively been engaged in repositioning itself as an energy infrastructure-focused company. And these efforts have started paying off in recent years, which clearly reflects in its earnings growth in recent years. I expect Gibson Energy’s already solid financial growth trends to improve further in the years to come as it targets deploying $150 million to $200 million in infrastructure capital every year in the long term.

Moreover, its high-quality contract structure, robust balance sheet, well-defined capital-funding strategy, and sustainable dividends make it a great dividend-paying stock to invest in for the long term.

Bottom line

By investing around $22,250 in Gibson Energy to buy 1,000 of its shares, you can expect to earn $390 in quarterly passive income from its dividends, which is equivalent to $1,560 per year. That said, you should always try to diversify your portfolio by including more such quality dividend stocks to it instead of relying on just one or two stocks.

The post 1 Dividend Stock to Buy With Incredible Long-Term Potential appeared first on The Motley Fool Canada .

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy . Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

2023