5.2% Yield? I’d Consider Buying This Dividend Stock and Holding it for Decades

With volatility in the markets and inflation still eating away at savings, the idea of locking in income for decades has never looked better. While many investors chase flashy growth stocks, the real wealth often comes from slow, consistent paycheques. That’s why I’m buying Vermilion Energy (TSX: Know) and holding it for the long haul. Let’s get more into why.

The stock

Let’s start with the headline number: Vermilion offers a dividend yield of 5.23% right now. That kind of income is rare from a dividend stock with solid fundamentals and global operations. Even better, it pays that dividend quarterly, which means four reliable payouts each year, ideal for anyone building up passive income in a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).

Vermilion’s business is all about oil and natural gas, and it does it across North America, Europe, and Australia. That global reach has been a big advantage. It lets the dividend stock access premium-priced markets, like Europe, where natural gas sells at a higher rate than in North America. That helped keep revenue strong even when oil prices softened.

In the first quarter of 2025, Vermilion posted petroleum and natural gas sales of $614 million. Net earnings came in at $48.8 million, while free cash flow hit $96 million. That’s a jump from the $72 million in free cash flow posted last quarter. It also repurchased $45 million in shares, showing confidence in the company’s own long-term outlook. Production averaged 82,389 barrels of oil equivalent per day. That number’s expected to grow as capital investments kick in later this year.

More to come

What stands out in the earnings is the focus on capital discipline. Vermilion continues to invest in its top-producing assets while reducing debt. The dividend stock brought net debt down to $1.1 billion this quarter. That’s a 22% reduction year over year. With more cash flow going toward dividends and buybacks, investors get rewarded in more ways than one.

Of course, no energy stock comes without risk. Commodity prices are unpredictable, and even though Vermilion benefits from geographic diversification, it’s still tied to oil and gas prices. The dividend stock also paused its dividend back in 2020 during the pandemic. That break, though, was brief, and the dividend has been restored and increased since then.

Considerations

Investors often ask whether it’s smart to hold energy stocks long term. With the transition to renewables underway, it’s a fair question. But the reality is that oil and natural gas aren’t going away anytime soon. In fact, demand in Europe is still growing, particularly as countries shift away from Russian supply. Vermilion is well-positioned to meet that demand through its Corrib gas project in Ireland and other European assets.

The dividend also looks safe for now. Based on its current free cash flow and payout ratio, Vermilion has room to maintain or even grow its dividend. The dividend stock’s long-term plan includes paying back more debt and boosting shareholder returns. That’s what makes it ideal for those looking for income with upside.

Bottom line

With so many Canadians thinking about financial security, especially in uncertain times, Vermilion offers a strong case. It pays well, invests wisely, and doesn’t overpromise. That 5.2% yield isn’t just a number; it’s a cushion. And when markets get rocky, that cushion makes all the difference. In fact, a $5,000 investment could bring in annual dividends of about $1,004.64!

In a world where stability is underrated, Vermilion Energy offers something simple but powerful: regular income, strong operations, and a focus on the long term.