Month-to-month Dividend Inventory In Focus: Surge Power

Revealed on July seventeenth, 2025 by Aristofanis Papadatos

Surge Power (ZPTAF) has two interesting funding traits:

#1: It’s providing an above-average dividend yield of seven.8%, which is greater than six instances the common dividend yield of the S&P 500.

#2: It pays dividends month-to-month as a substitute of quarterly.

Associated: Record of month-to-month dividend shares

You’ll be able to obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter like dividend yields and payout ratios) by clicking on the hyperlink under:

The mix of an above-average dividend yield and a month-to-month dividend makes Surge Power a lovely choice for particular person traders.

However there’s extra to the corporate than simply these components. Maintain studying this text to be taught extra about Surge Power.

Enterprise Overview

Surge Power is an unbiased oil and fuel exploration, improvement and manufacturing firm that operates primarily in Alberta, Saskatchewan and Manitoba.

The corporate holds a centered and operated portfolio of sunshine and medium gravity crude oil belongings, together with giant oil‑in‑place reservoirs with low restoration components.

Surge Power maintains a major stock of low-risk improvement drilling areas, together with advancing water‑flood enhanced restoration initiatives, whereas retaining operator management and excessive working pursuits throughout its key performs. Its technique revolves round disciplined capital allocation, together with focusing on the very best return alternatives.

Surge Power is headquartered in Calgary, Canada. It was based in 1998 beneath the title Zapata Power and altered its title to Surge Power in 2010. As 89% of the manufacturing of Surge Power is crude oil, the corporate must be considered as an nearly pure oil producer.

Surge Power affords traders publicity to 2 of the highest 5 standard oil progress performs in Canada, particularly the Sparky and Saskatchewan. Every of those two performs affords distinctive financial traits.

Supply: Investor Presentation

Because of the exceptionally excessive working netbacks of its crude oil reserves and low decline charges, Surge Power enjoys one of many widest free money move margins (31%) in its peer group.

As an oil producer, Surge Power is delicate to the cycles of the oil trade. This sensitivity is clearly mirrored within the unstable efficiency report of the corporate. On the brilliant aspect, Surge Power has remained worthwhile each single 12 months during the last decade.

Even in 2020, when most oil producers incurred losses as a result of coronavirus disaster, Surge Power remained worthwhile. This can be a testomony to the prime quality and low manufacturing price of the reserves of the corporate.

Within the first quarter of this 12 months, Surge Power posted basically flat manufacturing over the prior 12 months’s quarter nevertheless it benefited from larger realized oil costs and decrease hedging losses. In consequence, the adjusted funds move per share of the corporate grew 8%, from $0.37 to $0.40.

As Surge Power is extremely delicate to the gyrations of the value of oil, you will need to look at the standing of the worldwide oil market. OPEC offered robust assist to the value of oil by way of unprecedented manufacturing cuts in the previous few years however this technique reached its limits final 12 months as a result of increase of manufacturing in international locations outdoors the cartel.

The U.S., Canada and Brazil, have been profiting from the diminished output of OPEC and thus they’ve been rising their output at a quick tempo. In consequence, they’ve been gaining market share from OPEC whereas mitigating the impact of the sacrifices of OPEC members.

This example led many OPEC members, which depend on oil gross sales to fund their authorities budgets, to change into dissatisfied with their diminished manufacturing quotas. Notably, Angola exited OPEC firstly of 2024 because of its dissatisfaction with its low manufacturing quota.

Attributable to turmoil amongst its members, OPEC started to unwind its manufacturing cuts in April, with a said aim to lift its output by 2.2 million barrels per day till the top of 2026. As this shift within the coverage of OPEC is more likely to lead to a world surplus of oil, the value of oil has fallen under the technical assist of $70 this 12 months.

Nonetheless, it has remained above common and thus Surge Power is more likely to stay extremely worthwhile this 12 months.

Progress Prospects

Surge Power has thrilling progress potential, primarily due to its dominant land place within the Sparky space, which incorporates one of many largest accumulations of oil in Canada.

Supply: Investor Presentation

Because of its concentrate on this extremely prolific space, Surge Power has grown its manufacturing within the Sparky space at a formidable charge, from 1,800 barrels per day in 2011 to roughly 13,000 barrels per day this 12 months.

As there are completely no indicators of fatigue, we anticipate robust manufacturing progress to stay in place for the subsequent a number of years.

However, as an oil and fuel producer, Surge Power is weak to the wild swings of the value of oil. The corporate posted report funds move per share in 2022 due to the onset of the warfare in Ukraine and the resultant sanctions of the U.S. and European Union on Russia, which led the value of oil to skyrocket to a 13-year excessive.

Nonetheless, now that the worldwide oil market has absorbed the impression of the warfare in Ukraine and OPEC has begun to unwind its manufacturing cuts, the value of oil has moderated.

In consequence, the funds move per share of Surge Power decreased from an all-time excessive of $2.96 in 2022 to $1.99 in 2024. We anticipate funds move per share of roughly $2.05 this 12 months.

Regardless of the promising progress prospects of Surge Power, we have now assumed flat funds move per share over the subsequent 5 years in an effort to be on the secure aspect, given the wild swings of the value of oil and the considerably excessive comparability base fashioned by the anticipated funds move per share this 12 months.

Surge Power has a considerably leveraged however respectable steadiness sheet. Its internet debt is $406 million, which is 84% of the market capitalization of the inventory. Beneath regular enterprise circumstances, the corporate shouldn’t be more likely to have any drawback servicing its debt.

However, within the occasion of a extreme and extended downturn, Surge Power could come beneath some strain because of its considerably leveraged steadiness sheet.

Nonetheless, the defensive enterprise mannequin of Surge Power, which has helped the corporate stay worthwhile even through the fiercest downturns of the power sector, renders this upstream participant pretty resilient to downturns.

Dividend & Valuation Evaluation

Surge Power is at the moment providing an above-average dividend yield of seven.8%, which is greater than six instances the 1.2% yield of the S&P 500.

The inventory is an attention-grabbing candidate for revenue traders, however they need to remember that the dividend shouldn’t be fully secure as a result of dramatic cycles of the value of oil.

With that mentioned, Surge Power has a wholesome payout ratio of solely 19%. Given additionally its high-quality belongings and its resultant promising progress prospects, the corporate is more likely to increase its dividend within the upcoming years.

In reference to the valuation, Surge Power is at the moment buying and selling for two.4 instances its anticipated funds move per share this 12 months. Given the excessive cyclicality of the corporate, we assume a good price-to-funds move ratio of two.0.

Due to this fact, the present funds move a number of is larger than our assumed honest price-to-funds move ratio. If the inventory trades at its honest valuation degree in 5 years, it should incur a 3.4% annualized drag in its returns.

Considering flat funds move per share over the subsequent 5 years, the 7.8% present dividend yield but additionally a 3.4% annualized headwind of valuation degree, Surge Power may supply a 4.8% common annual whole return over the subsequent 5 years.

Whereas the excessive dividend yield with a large margin of security is engaging, the anticipated whole return alerts that traders ought to in all probability look ahead to a decrease entry level.

Last Ideas

Surge Power has been thriving since 2021 due to an excellent setting of above-average oil costs. The inventory is providing an above-average dividend yield of seven.8% however its considerably wealthy valuation alerts that traders ought to in all probability look ahead to a extra opportune entry level.

Additionally it is necessary to notice that Surge Power has confirmed extremely weak to the cycles of the value of oil. Due to this fact, it’s appropriate just for affected person traders, who can endure excessive inventory value volatility.

Extra Studying

Don’t miss the assets under for extra month-to-month dividend inventory investing analysis.

And see the assets under for extra compelling funding concepts for dividend progress shares and/or high-yield funding securities.