1 growth stocks to allocate more free cash flow to investors
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Growth stocks are battered in 2022, but a comeback could come sooner rather than later. Mid-week, the tech sector advanced 4.26% to lift the TSX above the 19,000 mark. Energy, the best performing sector this year, also rebounded with a gain of 2.95%.
However, Tourmaline Oil (TSX:TOU) is the top choice if you are looking not only for growth stocks, but also for dividend growth stocks. On July 27, 2022, the $24.63 billion producer of North America‘s cleanest and cheapest natural gas announced a special dividend – the third of the year.
Although the regular dividend yield is modest (1.27%), management is ready to declare more special payments to shareholders. Additionally, at $73.43 per share, the one-year price return is 127.65%, while the year-to-date gain is 90.35%. Market analysts covering tourmaline forecast a price appreciation of 23.5% to $90.73 (target average price) in 12 months.
Energy and technology are currently in extreme positions with the first up 38.39% and the second still in the red with -35.22%. However, Shopify (+11.01%), as well as Hut 8 Mining (+13.27%) and Light trade (+7.59%) led the widespread rally on Wednesday.
Investors were encouraged by the tech superstar’s statement. Tobi Lütke, CEO of Shopify, unveiled the long-term plan to reduce costs and improve services for small businesses. Market analysts are also bullish on the crypto-stock and e-commerce software provider. Technological power could reappear once inflation is contained.
Going back to Tourmaline, high-grade exploration and production reported record cash flow and free cash flow (FCF) of $1.35 billion and $1.1 billion in the second quarter of 2022 Due to the huge cash on hand, management announced a special dividend ($2 per common share). share) to be paid on August 12, 2022.
Management maintains a strong outlook for commodity prices and expects record FCF in 2022. The plan is to return at least 60% of FCF to shareholders this year through base dividend increases, special dividends and share buybacks. For 2023, the FCF allocation percentage to shareholders is between 50% and 75%.
Note that the energy stock intends to pay quarterly special dividends through the balance of 2022 and 2023. However, management clarifies that special dividend amounts will be a function of commodity prices and available quarterly FCF . If you include next month’s special dividend, the total 12-month dividend is $6.28 per share, which translates to a dividend yield of 9%.
Solid supply and demand fundamentals
Tourmaline is confident that the long-term supply and demand fundamentals will remain strong, as it expects commodity prices to remain high for an extended period. However, management expects commodity prices to be more volatile, locally and globally, than historical trends.
Due to its profile of sustained annual production growth of 6% per year from 2022 to 2028, management is confident in achieving its objective of a strong and sustainable annual return for shareholders (above 60% of the FCF) in 2022.
More free cash flow
Tourmaline is a major growth-oriented oil and gas company in Canada. He optimizes shareholder returns by focusing on operational efficiency and costs. The promise to allocate more free cash flow to shareholders is not pure bluster.