Vermilion Energy (TSX:VET)(NYSE:VET) has been struggling this year but a drop in oil prices hasn’t stopped the oil and gas company from boosting its dividend. Last week, the company announced an 8% increase in its quarterly dividend to $0.13 per share. With the increase, the company will be paying out $0.52 over the course of a full year, resulting in a yield of about 4.1%, which is well above average. This comes in the wake of a challenging year, with the stock down 20% year-to-date due to declining oil prices and reduced investor enthusiasm for energy stocks.
Despite market headwinds, Vermilion projects 2025 free cash flow of $400 million, supporting its capital allocation strategy and debt reduction goals. The company’s Board of Directors recently approved a capital budget between $600-$625 million for the new year as it remains focused on growing production by around 2%.
The company is also making efforts to reduce risk for investors as it has hedged 30% of its 2025 production to mitigate potential volatility in commodity prices
Investors seeking income and long-term growth potential in the energy sector may find Vermilion appealing, particularly as the company enhances shareholder returns and stabilizes operations in a volatile environment. While there is some risk here due to the uncertainty around oil prices, Vermilion has posted an operating profit in each of the past four quarters. The stock also comes at a discount, trading at around 0.7 times its book value and a forward price-to-earnings multiple of nine.
If you want a good, growing dividend stock and exposure to oil and gas, Vermilion could make for an underrated buy heading into 2025.
