Investing in dividend stocks of high quality can be a beneficial strategy to build long-term wealth and create a reliable source of passive income. It is important for investors to prioritize companies with strong financial performance, a healthy payout ratio, and a robust balance sheet, rather than simply chasing stocks with a high yield.
One small-cap energy stock that has caught the attention of investors is Alvopetro Energy, valued at $172 million by market cap. As an independent Brazil-based upstream and midstream operator, Alvopetro Energy is the first integrated onshore natural gas provider in Brazil and has seen significant returns of over 700% since the beginning of 2018. Despite these impressive gains, the stock is currently trading 51% below its all-time highs, presenting an opportunity for value investors.
Alvopetro Energy is the largest oil producer in South America and the ninth largest globally. With Brazil’s stable regulatory environment attracting new investments in the energy sector, Alvopetro is well-positioned to expand its presence in the onshore oil and gas market.
In the first quarter of 2024, Alvopetro Energy experienced a decrease in daily sales due to lower natural gas demand. However, its average realized natural gas price was higher compared to the previous year. The company’s operating netback and funds flow from operations remained strong, signaling efficient operations.
While Alvopetro Energy reduced its quarterly dividend in the current quarter, the company has a sustainable payout ratio and a history of returning value to shareholders. Analysts expect the company’s earnings to grow in the coming years, making Alvopetro stock an attractive investment opportunity. Despite the risks associated with volatile earnings, investors may want to consider adding a small exposure to Alvopetro Energy to their portfolio to potentially benefit from future gains as market sentiment improves.
