Surely, you must have heard by now that Warren Buffett’s Berkshire Hathaway took a stake in Suncor Energy (TSX:SU)(NYSE:SU) late last year.
It’s awesome to get a vote of confidence from one of the greatest investors of all time, but be mindful that this isn’t the first time Mr. Buffett had taken a stake in Suncor.
He’d bought the stock in 2013 and got out of the position by 2016.
Suncor still offers great value. This graph further illustrates why Buffett took a bite at the levels he did in late 2018. Suncor’s a great trading stock — if you can catch it at a low and sell it at a high.
SU data by YCharts. The 10-year price action of Suncor Energy.
I bought Suncor in January this year before the news that Berkshire bought the stock came out. I gobbled up shares simply because I saw fabulous value, as well as a secure dividend.
Last year, Suncor generated more than $10 billion of operating cash flow and more than $3.8 billion of free cash flow! So, it was no surprise to me at all that the company increased its quarterly dividend by a hefty amount of 16.7% to $0.42 per share last month.
Furthermore, Suncor is awarded a high S&P credit rating of A-. So, you can be reassured that its balance sheet is strong.
Suncor still offers marvelous upside. Thomson Reuters analysts have a mean 12-month target of $54 per share, which represents 20% near-term upside potential from $45 per share.
Meanwhile, you can get real cash from the dividends as you wait for the stock to tick higher. Suncor is yielding 4.14% as of writing.
Another top energy giant for a profitable trade
CNQ data by YCharts. The 10-year price action of Canadian Natural Resources.
A quick look at the graph above, and you can tell that Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is a stock of similar nature to Suncor. The company is easily one of the top candidates in the Canadian oil patch for a profitable trade while getting a decent dividend.
The large-cap oil and gas producer just reported its fourth-quarter and full-year 2018 results on Thursday. Results were positive with the stock reacting by appreciating 3%.
In 2018, similar to Suncor, Canadian Natural Resources generated more than $10 billion of operating cash flow and about $4 billion of free cash flow.
Canadian Natural Resources didn’t disappoint by increasing its quarterly dividend at a double-digit growth rate of nearly 12% to $0.375 per share.
Additionally, the company is awarded a solid investment-grade S&P credit rating of BBB+. So, you can sleep with a peace of mind that Canadian Natural Resources’s balance sheet is intact.
Canadian Natural Resources still offers astounding upside. Reuters analysts have a mean 12-month target of $46.20 per share, which represents 25% near-term upside potential.
You also get a nice dividend while waiting for price appreciation. Canadian Natural Resources offers a yield of 4.14% as of writing.
The Foolish takeaway is that you must buy these stocks at lows and sell at highs to maximize returns. They’re not the best of buy-and-hold energy stocks.
Currently, both Suncor and Canadian Natural Resources still offer substantial upside potential. They also give back returns from a 4% yield in the meantime.
If anything, these stocks are solid buys right now and on any further dips.
Stay Hungry. Stay Foolish.
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Fool contributor Kay Ng owns shares of Suncor Energy. The Motley Fool owns shares of Berkshire Hathaway (B shares).