Is Imperial Oil Inventory a Purchase for Its 2.3% Dividend Yield?

In case you’re on the lookout for publicity to Canada’s vitality sector, Imperial Oil (TSX:IMO) stands out as a stable decide. Whereas its present dividend yield of two.3% will not be the very best obtainable on the TSX immediately, Imperial Oil’s repute for stability and robust financials make it a protected inventory for Silly buyers looking for regular revenue and the potential of capital progress in the long term.

On this article, I’ll spotlight why Imperial Oil’s steady dividends, mixed with its sturdy fundamentals, may make it a wise addition to your portfolio proper now.

Imperial Oil inventory

In a sector identified for volatility, IMO inventory has been outperforming the broader market by a large margin for the final 4 consecutive years. This Calgary-headquartered built-in oil firm primarily focuses on the manufacturing, refining, and advertising and marketing of petroleum merchandise. It distributes petroleum merchandise nationwide, primarily underneath the Esso model, and can also be energetic within the chemical sector.

After the COVID-19-related woes led to the crash within the costs of vitality merchandise, Imperial Oil’s share value tanked by 30% to round $24.16 per share. Nonetheless, its shares have staged a outstanding comeback, rallying over 338% from their closing stage in 2020. To this point in 2024, IMO inventory has inched up by over 40% to presently commerce at $105.76 per share with a market cap of $55.4 billion. At this market value, the inventory affords a 2.3% annualized dividend yield.

Robust financials help the inventory rally

Imperial Oil’s spectacular inventory efficiency can largely be attributed to its sturdy monetary place. In 2023, the corporate generated almost $4.9 billion in web revenue and $3.7 billion in money stream from working actions, which helped keep liquidity and help ongoing capital investments.

One other key space that buyers could need to word is its constant deal with managing prices successfully. The corporate posted $9.8 billion in working prices final 12 months, reflecting a slight discount from the earlier 12 months. These value controls, mixed with sturdy income era, have allowed Imperial to take care of a aggressive dividend payout and maintain its share buyback applications. In truth, in 2023 alone, the corporate repurchased $3.8 billion value of shares.

Is Imperial Oil inventory a purchase for its 2.3% dividend yield?

In addition to its sturdy financials, Imperial Oil is persevering with to advance vital progress initiatives to speed up progress additional, such because the Grand Rapids Part 1 venture, the primary solvent-assisted steam-assisted gravity drainage venture within the business. This progressive know-how is prone to not solely enhance manufacturing effectivity but in addition scale back greenhouse gasoline emissions, which may very well be a key benefit in immediately’s regulatory surroundings.

Furthermore, the corporate’s work on Canada’s largest renewable diesel facility on the Strathcona refinery is about to strengthen its place within the vitality transition additional. The power is anticipated to provide over a billion litres of renewable diesel yearly, which also needs to add to its income progress. Contemplating these elements, regardless of a low annual dividend yield of two.3%, Imperial Oil’s dividend sustainability and robust progress prospects make it a lovely inventory for long-term buyers.