Energy stocks were some of the hardest hit during the spring market crash. Oil and gas producers were throttled due to the COVID-19 pandemic, as well as a price war that had erupted between Russia and Saudi Arabia. Fortunately, the latter issue has been smoothed over in the months since. The COVID-19 pandemic continues to confound policy makers, but many countries have seen the beginnings of a return to normalcy. This rising demand is good news for energy stocks.
Today, I want to look at three energy stocks that are worth considering in the middle of July. A $5,000 investment in the stocks below could net solid capital growth and strong income in the months and years to come. Let’s dive in.
Two energy stocks with great value
It is tough to find discounts on the TSX today, as stocks surged in the latter half of spring. However, there is still solid value in the energy sector.
The first energy stock I want to look at is Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ). Canadian Natural Resources is a Calgary-based oil and gas company. Its stock has dropped 43% in 2020 as of close on July 10. Shares have climbed 24% over the past three months.
In Q1 2020, Canadian Natural Resources delivered record quarterly corporate production of roughly 1,179 MBOE/d. This was under the maximum allowable volumes due to Alberta’s production curtailment policy. The company finished the first quarter with a strong balance sheet. Shares of Canadian Natural Resources last had a price-to-earnings (P/E) ratio of 8.6 and a price-to-book (P/B) value of 0.8. This puts the stock in attractive value territory. Better yet, this energy stock offers a quarterly dividend of $0.425 per share. This represents a hefty 7.4% yield.
Imperial Oil is another Calgary-based petroleum company. The stock is down 37% so far this year. In its first-quarter 2020 results, Imperial Oil reported a net loss of $188 million. This was primarily due to depressed March crude prices. However, the company finished Q1 2020 with a strong cash balance of $1.4 billion.
Shares of Imperial Oil last had a favourable P/E ratio of 9.3 and a P/B value of 0.6. Moreover, the energy stock maintained its quarterly dividend of $0.22 per share. Imperial Oil possesses a solid 4.2% dividend yield. It has delivered dividend growth for 25 consecutive years.
The 10 Best Stocks to Buy This MonthClick here to learn more!
Don’t sleep on this heavyweight dividend stock
Back in early May, I’d discussed why Enbridge looked like a steal. This elite energy stock is still worth your attention in the middle of July. Shares have dropped 19% in 2020 as of close on July 10. The company delivered adjusted earnings of $1.66 billion, or $0.83 per share, in Q1 2020 compared to $1.64 billion, or $0.81 per share, in the prior year.
Shares of Enbridge last had a solid P/B value of 1.3. Most investors will be on the hunt for Enbridge’s superior income. It currently offers a quarterly dividend of $0.81 per share, representing a tasty 8% yield. This top-tier energy stock still looks undervalued in the early summer.
On the topic of stocks to scoop up today...
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.