Enbridge vs. Suncor: Which Is the Better Buy Today?

Should Canadian investors pick up Enbridge Inc. (TSX:ENB)(NYSE:ENB) or Suncor Energy Inc. (TSX:SU)(NYSE:SU) in March?

| More on:
question marks written reminders tickets

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Canada’s energy sector has received a much-needed boost from rising oil and gas prices over the last few months. In February, Goldman Sachs projected that the price of West Texas Crude would reach US$75/barrel on the back of improved demand and continued production cuts from OPEC. This is good news for the top energy stocks on the TSX.

Today, I want to look at two heavyweights in this space: Enbridge (TSX:ENB)(NYSE:ENB) and Suncor (TSX:SU)(NYSE:SU). Which is the better buy today? Let’s dive in.

Why you can trust Enbridge for years to come

Enbridge is the largest energy infrastructure company in North America. Its shares have climbed 10% in 2021 as of early afternoon trading on March 17. The stock is up nearly 20% in the year-over-year period. Investors can look forward to the release of its first quarter 2021 results in May.

In 2020, Enbridge reported adjusted EBITDA of $13.2 billion, which was flat from the prior year. However, adjusted earnings came in at $4.89 billion – down from $5.34 billion in 2019. Enbridge has encountered regulatory pushback south of the border in recent months. Michigan Governor Gretchen Whitmer revoked the 1953 easement that allowed the Line 5 pipeline to operate freely for 65 years. Enbridge predicts that the legal battle will continue for “years,” which is why I’d suggested investors could trust the top energy stock in the near term.

Shares of Enbridge last had a price-to-earnings ratio of 30, putting it in better value territory than the industry average. Meanwhile, the top energy stock offers a quarterly dividend of $0.835 per share, which represents a tasty 7.3% yield.

Suncor stock is surging on the back of the oil and gas rally

Suncor is another top energy stock on the TSX. The Calgary-based company specializes in production of synthetic crude from oil sands. It has pushed back against predictions of the demise of the oil sands. Former CEO Steve Williams said in 2017 that oil sands extraction would continue for a century. Shares of Suncor have climbed 33% in 2021 so far. The stock is up nearly 60% year over year.

While the company reported improvement in Q4 2020, it still struggled mightily for the full year. It posted a net loss of $4.31 billion – down from net earnings of $2.89 billion in 2019. Fortunately, Suncor’s operating loss improved markedly in the fourth quarter compared to Q3 2020. The US$80 price point is the big target for Suncor. At that stage, its profitability stands to receive a big boost that could provide relief after a brutal 2020.

Suncor was forced to drop its quarterly dividend to $0.21 per share in 2020, which represents a 2.9% yield. Hopefully, continued earnings improvement will lead to a dividend hike in the quarters ahead.

Which stock is the better buy today?

In February, I’d suggested that both stocks were worth holding onto for the long term. Enbridge is the better bet for income investors right now, but in terms of growth I’m sticking with Suncor. If Goldman Sachs’ oil prediction shakes out, Suncor will benefit in a big way. It still offers a solid entry point price wise for investors right now.

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.

More on Investing

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Oversold Great Canadian Dividend Stocks to Buy Now and Own for 20 Years

These top Canadian dividend stocks look oversold right now and continue to raise their payouts.

Read more »

Man holding magnifying glass over a document
Dividend Stocks

3 Value TSX Stocks to Eye in July 2022

Here are a few value TSX stocks to check out in July 2022. They also pay juicy, safe dividend income…

Read more »

sad concerned deep in thought

Elon Musk Buys Dogecoin: Should You?

Elon Musk is back to buying Dogecoin (CRYPTO:DOGE). Should you join him?

Read more »

analyze data
Dividend Stocks

2 Canadian Stocks at the Top of My Buy List

Here are two of the top Canadian stocks on my buy list, as the market uncertainty continues to plague Canadian…

Read more »

question marks written reminders tickets

Oil Stocks vs. Gold: Which Is Better for a Recession?

Gold is considered a good asset to hold in recessions, but oil stocks like Cenovus Energy (TSX:CVE)(NYSE:CVE) are doing better…

Read more »

gas station, convenience store, gas pumps

Is Alimentation Couche-Tard (TSX:ATD) Stock a Buy After Disappointing Earnings?

Alimentation Couche-Tard (TSX:ATD) had a challenging fourth quarter, but there are still plenty of reasons to like this stock long…

Read more »

Stocks for Beginners

Investing Strategies for Canadians in an Uncertain Economy

These are uncertain times, as the economy grapples with high inflation. Here are four investing strategies for the current market.

Read more »

Tech Stocks

These 3 Cheap Stocks Would Be an Excellent Addition to Your Portfolio

Given their attractive valuation and solid growth potential, these three stocks would be an excellent addition to your portfolio.

Read more »