Tourmaline Oil (TOU.TO), Canada's largest natural gas producer, is boosting its dividend for the fifth time since the beginning of last year.
The Calgary-based company announced late Wednesday that its quarterly payout will jump 12.5 per cent to $0.225 per share from $0.20 as of June 30. As part of its commitment to reward shareholders, Tourmaline has also issued three special dividends since 2021, most recently a payment of $1.50 per share on May 19.
"We see Tourmaline's dividend increase announcement as a positive for the stock. The magnitude of the increase is in line with our forecasts, and [is] highly sustainable, but comes a quarter sooner than we had expected," Scotiabank Global Equity Research analyst Cameron Bean wrote in a note to clients. "We continue to like Tourmaline's cash return plan, and see it as highly beneficial for investors."
Tourmaline generated $618 million in free cash flow in the first quarter of 2022. Management has guided towards $3.9 billion in free cash flow for this fiscal year. On Wednesday, the company said its cash flow generation outlook "continues to improve for both 2022 and 2023 as strip prices continue to increase."
Toronto-listed Tourmaline shares have climbed more than 92 per cent year-to-date, riding the upward momentum for oil and gas in the wake of Russia's invasion of Ukraine, and stretched global energy supplies. The stock added 0.86 per cent to $79.42 as at 12:43 p.m. ET on Thursday.
"While the stock screens more expensive than Canadian and U.S. gas-weighted peers, we continue to like the story for exposure within the space, with capital returns stacking up amongst the best within our coverage," Tudor, Pickering, Holt & Co. analyst Matt Murphy wrote in a report Thursday.
Like Bean, Murphy says the dividend boost announced on Wednesday was in line with his expectations, but earlier than expected.
Bean says Tourmaline remains his top pick in the sector, noting its strong asset base and "best-in-class" natural gas marketing portfolio, as well as its track record for cash returns. Jason Bouvier, his colleague at the bank, recently called for more special and variable dividends to be initiated across the energy sector through 2023.
Bean maintains a $98 one-year price target on Tourmaline shares with a "sector outperform rating." Murphy's target is $90, with a "buy" rating.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.