Monthly Dividend Stock In Focus: Peyto Exploration & Development Corp.

Updated on April 10th, 2025 by Felix Martinez

Energy stocks often offer highly attractive income yields since they do not spend much on growth. Instead, many energy stocks keep their production more or less stable while returning a large portion of their cash flows to their investors.

This is why many retirees and other income investors like to invest in energy stocks and their above-average dividend yields. Most energy stocks pay quarterly dividends, but there are outliers.

Peyto Exploration & Development Corp. (PEYUF) is an outlier, making monthly dividend payments.

There are currently just 76 monthly dividend stocks.

You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:

Peyto Exploration & Development (PEYUF) offers a dividend yield of 8.1% at current prices. This is a very high yield, which, combined with the monthly dividend payments, provides a vast and very smooth income stream.

These dividend properties make Peyto Exploration & Development attractive to income investors. This article will discuss Peyto Exploration & Development’s investment prospects in detail.

Business Overview

Peyto Exploration & Development, which was once known as Peyto Energy Trust, is a Canadian upstream energy company headquartered in Calgary. Peyto engages in the exploration, development, and production of oil and natural gas.

Today, its market capitalization is US$2.4 billion, meaning it is not among the largest oil companies in Canada or the world. Still, at least in the natural gas space, Peyto is among the top five producers in Canada in terms of production volume.

Source: Investor Presentation

Peyto is focused on the Alberta Deep Basin region, which holds a sizeable asset base with vast proven reserves. These reserves give Peyto a long reserve life, meaning the company could produce from its existing assets for a long period of time. But since Peyto adds to its reserves constantly via new exploration, its reserve life can be expected to remain on the rise.

Importantly, Peyto is the lowest-cost producer in the region in which it is active. As a result, Peyto will generate above-average margins in all market environments, and it might still be profitable in a commodity price environment where many of its peers are no longer profitable.

The low breakeven costs help avoid losses in bad times and make Peyto a less risky investment, relative to higher-cost producers, which will more easily be forced to generate net losses during bad times.

Growth Prospects

While many energy companies do not invest heavily in growth, Peyto has a pretty strong growth track record. This was partly made possible by the fact that Peyto was still a pretty small company in the past, which made it easier to maintain a strong relative growth rate for a longer period of time.

Source: Investor Presentation

Peyto Exploration & Development delivered strong financial and operational performance in 2024, despite low natural gas prices. The company generated $712.8 million in funds from operations ($3.62 per diluted share) and $280.6 million in earnings ($1.42 per share). It returned a record $258.4 million in dividends to shareholders and ended the year with a record production of 136,000 boe/d. Capital spending totaled $457.6 million, resulting in a capital efficiency of $9,700 per boe/d. Peyto also achieved a 66% operating margin and 24% profit margin and reduced net debt by $14.2 million.

Peyto’s disciplined hedging and market diversification strategy helped offset the impact of weak AECO gas prices, which averaged just $1.38/GJ. The company realized a much higher average price of $3.32/Mcf and secured strong hedge coverage for 2025 and 2026 at prices above $4/Mcf. Peyto booked a record 457 Bcfe of PDP reserves and increased total proved and probable reserves by 5%. With PDP finding and development costs of $1.00/Mcfe and a field netback of $3.26/Mcfe, Peyto achieved a 3.3x recycle ratio—the best in its history.

Operationally, Peyto averaged 125,202 boe/d for the year, up 19% from 2023, supported by strong drilling results and a full year of contributions from the Repsol acquisition. Quarterly operating costs were reduced to $0.50/Mcfe, achieving the company’s 10% cost-reduction goal. Peyto continues to lead the Canadian oil and gas sector in cost efficiency, reserve growth, and shareholder returns.

Dividend Analysis

Like many other energy stocks, Peyto is seen as an income investment by many individual investors. And rightfully so, since the company offers a very attractive dividend yield of 8.1%, based on a monthly dividend payout of CAD$0.11 and a current exchange rate of CAD$1.37 per USD, with Peyto trading at US$11.00 right now.

Based on Peyto’s forecasted 2025 earnings-per-share of US$1.83, the payout ratio is 50%. This is a high payout ratio, particularly given the oil and gas industry’s high cyclicality. Therefore, the dividend is not safe.

Since Peyto hedges a large portion of its production, it somewhat mitigates the swings in its profits caused by the cycles of oil and gas prices, but it remains sensitive to these cycles.

Final Thoughts

Peyto Exploration & Development Corp. is not very well known, but the company has a highly successful track record. That holds true for production and earnings growth and for returning cash to the company’s owners via dividends.

Peyto trades with a very high 8.1% dividend yield today, and that dividend is covered based on the forecasted earnings for the current year. Since Peyto makes monthly dividend payments, investors get almost 0.75% of their principal per month at current prices, which is very intriguing for retirees and other income investors who live off their dividends.

Peyto is currently trading at 6.3 times this year’s expected net profit, which is a reasonable valuation for an energy stock. It would not be surprising to see Peyto’s valuation expand somewhat over the coming years, which would add to Peyto’s total return outlook.

Thanks to its exceptionally high dividend yield, business and earnings growth potential, and potential for some expansion of its valuation level, Peyto could deliver highly compelling total returns going forward.

Of course, investors should remember that Peyto is still an E&P company and is thus exposed to commodity price movements.

While its low break-even costs make it more resilient than most peers, Peyto is still greatly affected by oil and natural gas price movements, and hence, it carries a significant amount of risk.

The stock is suitable only for the investors who can stomach the dramatic cycles of the oil and gas prices.

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