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By Siraj Sarwar

Commodity stocks are some of the most attractive investments when the economy shifts to the recovery phase. One way to benefit from the rise on commodity prices is to look at corporations that deal with commodities such as oil and gas.

For those looking to enhance their portfolios with some potential stocks, the energy sector might be the place to look. Many stocks in the sector also have a long history of increasing dividends. Therefore, this sector has historically been a favorite of income-focused investors. In this article, I selected three stocks from the oil and gas industry. These stocks have eye-catching dividend yields, solid financial positions and strong growth prospects.

Enerplus Corporation (NYSE:ERF) is an oil and gas company that seeks to provide an attractive yield, balanced with a sustainable level of growth. Recently, the company sold off oil sands and conventional assets. It used the proceeds to build its acreage position in Bakken Shale in North Dakota and Marcellus Shale in Pennsylvania.

I think the high levels of capital spending in these plays may spread the company's cash flow too thin, and I would prefer the company to concentrate its portfolio through divestitures to improve shareholder returns. Enerplus has displayed strong growth over the previous three years, but has suffered recently because of the depressed natural gas prices in the last year.

Nevertheless, it is one of the best yielding stocks in the industry. Presently, the corporation pays a month-to-month cash dividend of $0.09, yielding 7.88%. Due to weak commodity prices and high transportation costs, the corporation had to reduce dividends by 50%. The corporation's cash flow has suffered slightly over the previous two years.

To offset the effect of low natural prices, Enerplus reduced its capital spending. This move can enhance the company's free cash flow. Consequently, the corporation will have more cash to protect its dividend payments. I believe Enerplus will sustain its dividend due to cut in its spending. Additionally, Enerplus made it crystal clear that, in spite of slow growth, the corporation expects to sustain its dividend.

Canadian Oil Sands (OTCQX:COSWF) is another Canada-based company. It provides investment opportunity in oil sands through its 36.74% interest in the Syncrude Project. The company has potential to generate 375,000 barrels per day.

Canadian Oil Sands offers an enormous quarterly dividend of $0.35 per share. With a dividend yield of 6.72%, Canadian Oil Sands has been named as top dividend stock by Dividend Channel. Since 2011, the company raised its dividend payment from $0.20 per share to $0.35 per share in 2012.

Canadian Oil Sands has been showing exceptional revenue growth over the years. Since 2009, the company's revenue increased from $2.77 billion to almost $4 billion at the end of 2012. The company's sale volume stands at 105,700 barrels per day. Additionally, the management forecasts to generate an annual average sales volume of $115 million barrels by the end of 2013.

The cash flow for the company is exceptionally strong. At the end of 2012, the company produced almost $1.6 billion or $3.26 per share in cash flows from operations. Last year, its cash flows from operations suffered due to the lower commodities prices. In the same period, the corporation spent $1.08 billion in capital expenditures.

The company is investing heavily in growth opportunities. Canadian Oil Sands is looking to replace or relocate Syncrude mining trains. The company was able to substantially reduce its debt by the end of 2012. However, Canadian estimates the debt level to increase over the next few years due to expansion plans. Nonetheless, the company has the potential to sustain and even increase dividends.

British Petroleum (NYSE:BP) is among the biggest names in the integrated oil and gas world. It has two main business segments: Exploration and Production, and Refining and Marketing. With a trailing yield of 4.48%, BP offers one of the best dividends in the oil industry. Recently, BP's dividend rose from $0.48/share to $0.54/share.

BP's revenues have elevated significantly over the previous three years. The company was able to increase revenue at 7.67%. However, BP was not able to increase profits at a similar pace, because the costs for the corporation have also been growing. The company's EPS increase by 3.94% in the last three years. Over the previous two years, the corporation has suffered enormously because of the Macondo well disaster.

However, BP has brought up $37.8 billion from the sale of non-core assets, excluding TNK-BP. Additionally, the company plans to continue restructuring in 2013. The corporation has declared an arrangement to sell its 50% share in TNK-BP to Rosneft, a Russian incorporated oil and gas corporation. BP will get $17.1 billion in cash and shares which represent 12.84% of Rosneft.

I believe the restructuring strategy can further enhance BP's cash flows and thus, dividends. BP could be an attractive pick for investors. In the past year, the company returned substantial amount to shareholders in the form of dividends. BP is a safe pick for dividend investors. Yet, the company has performed substantially below its American peers. Therefore, it still has substantial upside potential.

Source: 3 Oil And Gas Industry Names For Strong Dividends