Why This Energy Stock Is Trading Near its All-Time High

Parkland Fuel Corp. (TSX:PKI) tends to outperform in the energy sector, and it can continue to do so with its latest developments.

| More on:

With the WTI oil price falling below US$50 per barrel again, energy companies tumbled on Thursday. Some shares fell as much as 6%, while the midpoint decline was 3-4%.

Yet here we have Parkland Fuel Corp. (TSX:PKI), which fell less than 1%. In fact, in the last 12 months, Parkland Fuel’s shares have actually appreciated nearly 36%; it greatly outperformed other energy companies.

Similarly, in the last five years, Parkland Fuel has appreciated 122%, while the next best-performing stock only appreciated 46% in the period. To make Parkland Fuel more impressive, it has achieved outperformance with a below-average level of volatility.

How does Parkland Fuel do it? Can it continue to outperform? Before exploring the answers to these questions, let’s take a look first at its business.

What does Parkland Fuel do?

Parkland Fuel is the largest Canadian marketer of fuel and petroleum products. Specifically, it delivers refined fuels, propane, and other quality fuel and petroleum products to motorists, businesses, consumers, and wholesale customers in Canada and the U.S.

To do this, Parkland Fuel partners with refiners and suppliers. It benefits from inefficiencies in the market by taking advantage of arbitrage opportunities.

As well, it buys large volumes of the full range of refined products from refineries and sells these products through its marketing channels, including retail gas stations, and commercial fuel, propane, and lubricant delivery branches.

How Parkland Fuel is growing

Parkland Fuel grows organically and through acquisitions. It looks for ways to improve the customer experience and its operation efficiencies.

It also makes disciplined acquisitions that complement its business or expands its scale.

In April, Parkland Fuel agreed to acquire Chevron Canada R&M, which “[will] extend Parkland’s network coverage in British Columbia, and add significant supply infrastructure and logistics capability to support Parkland’s existing operations. Parkland will also become the exclusive distributor of Chevron-branded fuels in the network,” as discussed in its Q1 report.

As well, Parkland Fuel will acquire the majority of the Canadian business and assets of CST Brands, once Couche Tard closes the acquisition of CST Brands sometime between April and September 2018.

Both of these acquisitions will further strengthen Parkland Fuel’s leading position.

Dividend

Parkland Fuel has increased its dividend every year since 2013. At about $31 per share, it offers a yield of 3.7%. Its dividend per share is about 1.8% higher than it was a year ago.

Investor takeaway

Parkland Fuel tends to deliver above-average price appreciation with below-average volatility in the energy space. Eight analysts at Thomson Reuters have a 12-month mean price target of $35.80 per share on the stock, which implies upside potential of 15%. Not to mention the monthly dividend it offers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of ALIMENTATION COUCHE-TARD INC. Alimentation Couche Tard is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

4 Ways to Grow $100,000 Into $1 Million in Retirement Savings

Anyone can build a million-dollar retirement portfolio. Here are four ways you could practically grow $100,000 to $1 million.

Read more »

A shopper makes purchases from an online store.
Dividend Stocks

3 Reasons to Buy TFI Stock Like There’s No Tomorrow

TFI stock (TSX:TFII) had a hard 2023, but now it's set up for a solid 2024, with an acquisition that…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

5 Secrets of TFSA Millionaires

These lesser-known secrets can help you set up the perfect long-term portfolio and achieve a million-dollar TFSA!

Read more »

analyze data
Dividend Stocks

How to Build a Powerful Passive-Income Portfolio With Just $20,000

These fundamentally strong TSX stocks have paid and increased their dividend in all market conditions. Add these stocks to build…

Read more »

Canadian stocks are rising
Dividend Stocks

iShares S&P/TSX Capped REIT Index ETF (TSX:XRE): Why I Like this ETF Better Than a Rental Property

XRE is a great ETF for gaining exposure to the Canadian real estate sector.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 High-Yield Dividend Stocks That Pay Cash Every Month

These three dividend stocks all offer high yields and have sustainable dividends, making them some of the best investments to…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

3 Stocks That Could Create Lasting Generational Wealth

If you want to start transferring over your wealth, you'll need to actually have some! And these are three stocks…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio…

Read more »