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Is it Time to Add Crescent Point Energy Corp. or Suncor Energy Inc. to Your TFSA?

Oil has stabilized above US$60 per barrel, and investors are wondering if this might be the right time to add Canadian producers to their portfolios.

Let’s take a look at Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) and Suncor Energy Inc. (TSX:SU)(NYSE:SU) to see if one might be an interesting pick today.

Crescent Point

Crescent Point used to be a dividend darling in the oil patch, but the extended rout forced management to cut the popular monthly payout from $0.23 per share to $0.10, and then again to the current distribution of $0.03 per share. Dividend investors have pretty much headed for greener pastures, but value seekers are starting to take notice, and the present yield of 4.2% could turn out to be a nice bonus.

Crescent Point owns an attractive light-oil asset portfolio and has done a good job of increasing production, despite the difficult times in the market. In fact, 2017 exit production was 10% above previous the year on a per-share basis, and more gains are on the way in 2018.

The company finished 2017 with net debt of $4 billion, which is a lot for a business that currently sports a market capitalization of $4.8 billion, but Crescent Point remains well within its lending covenants and is working to strengthen the balance sheet through non-core asset dispositions. Management has found buyers for $320 million in assets in the past 15 months and reduced net debt by $111 million in 2017.

At current oil prices, cash flow should be strong enough to support the dividend, and further assets sales in 2018 could provide enough funds to make progress on debt reductions.

Where oil goes from here is anyone’s guess, but a move toward US$70 by the end of the year could bring a flood of money back into the sector, and Crescent Point could see a nice pop in the stock price if that happens.

At the time of writing, Crescent Point trades for $8.50 per share. To put things in perspective, it was a $45 stock when oil traded at US$100 per barrel.

Suncor

Suncor is widely known as an oil sands stock, but the company also operates large refineries and owns more than 1,500 Petro-Canada service stations. These downstream assets provide a nice hedge against falling oil prices and are a big reason the stock held up so well in recent years.

Suncor took advantage of its strong balance sheet to pick up attractive assets at discounted prices during the rout, including the takeover of Canadian Oil Sands, which gave Suncor a majority interest in Syncrude.

The company also pushed ahead with organic projects, including Fort Hills and Hebron. The two developments are now complete and ramping up production.

Rising output, lower operating costs, and higher oil prices are providing a nice boost to Suncor’s revenue and cash flow. As a result, the company recently raised its dividend by 12.5% for 2018. The stock is down slightly from a multi-year high it hit in January and provides a solid 3.3% yield.

Is one more attractive?

If you like the oil sector over the long haul but are concerned about volatility in the near to medium term, Suncor is probably the better bet today. Crescent Point arguably offers better upside torque on an extension of the oil recovery, but you have to be convinced oil is headed higher to make the stock your first pick.

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Fool contributor Andrew Walker has no position in any stock mentioned.

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