2 Top Canadian Energy Stocks That Just Doubled Their Dividends

These two Canadian energy giants have been taking full advantage of the rally in oil prices this year, making them some of the best stocks to buy now.

| More on:
energy industry

Image source: Getty Images

Throughout 2021, energy stocks have been some of the best investments Canadian investors could have made.

Oil prices have soared by roughly 60% this year. At the start of the year, WTI oil prices sat just below US$50 a barrel. Today, oil is sitting just below US$80 a barrel.

In addition, oil prices are now the highest they’ve been since 2014 and considerably higher than before the pandemic. So, finally, energy stocks, which were some of the last to start recovering from the pandemic, have been starting to do so.

While the energy sector has seen a strong improvement all year, it’s been lately that the biggest gains have come. Increasing inflation has sent prices soaring, and producers are reaping the benefits.

This has led to a significant increase in margins, especially for the top companies in the industry. So, here are two top Canadian energy stocks trading at attractive valuations that each just doubled their dividends.

Cenovus: A massive energy refiner and producer

Cenovus Energy (TSX:CVE)(NYSE:CVE) is one of the largest energy stocks in Canada, with a market cap north of $30 billion. The company has been taking full advantage of the strength in the energy sector this year, and its third-quarter earnings were very impressive.

Of course, the biggest announcement was a doubling of its dividend. However, the company also said it could buy back up to 10% of its shares over the next year.

The Canadian energy stock produced over 800,000 barrels of oil equivalent per day (BOE/d) in the quarter, which beat estimates by 4%. In addition, it also beat estimates on its funds from operations per share, showing just how much cash flow Cenovus is generating in this environment.

Since these earnings and the doubling of its dividend, the Canadian energy stock has rallied by almost 10%. However, it’s still slightly undervalued, making it an excellent investment today.

At current prices, Cenovus trades at a forward enterprise value (EV) to debt-adjusted cash flow (DACF) ratio of just 3.6 times. That’s considerably cheaper than the average of its peers.

So, if you’re looking for a Canadian energy stock to consider buying today, Cenovus is one of the best to consider.

Suncor: A top Canadian energy stock for long-term investors

Suncor Energy (TSX:SU)(NYSE:SU) is another massive blue-chip energy stock that’s been taking advantage of the current environment. Just like Cenovus, it doubled its dividend during its recent earnings report. Furthermore, it also said it could buy back up to 7% of the shares outstanding over the next year.

Suncor also exceeded the consensus expectations for production, with nearly 700,000 BOE/d produced in the quarter. However, the bigger takeaway for investors is the significant increase in its margins this year, which is leading the stock to earn a tonne of cash flow.

And now, with the doubling of its dividend, Suncor stock offers an appealing yield of 5.3%. Plus, it currently trades at a forward EV/DACF ratio of 4.3 times, which is slightly above Cenovus but still cheaper than several of its peers.

Bottom line

With the pullback in oil prices this week, these energy stocks have fallen slightly from their highs, offering investors an excellent discount to buy today. So, if you’re looking for a high-quality Canadian energy stock to buy and hold long term, now is a great time to invest, and these are two of the best to consider for your portfolio.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Energy Stocks

Gas pipelines
Energy Stocks

2 TSX Energy Stocks I’d Buy Over GICs for Better Returns

Suncor Energy (TSX:SU) and Enbridge (TSX:ENB) are dividend studs that could outdo GICs in a recession year.

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

Worried About Inflation? 2 TSX Energy Stocks That Actually Benefit From it

Here's why Suncor (TSX:SU) and Cenovus Energy (TSX:CVE) are two top-tier stocks investors should buy to battle inflation.

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

With Interest Rates Rising, This TSX Energy Stock Is a Smart Buy

TSX energy is risky, but it's an attractive bet for next year.

Read more »

Utility, wind power
Energy Stocks

3 Clean Energy Stocks With Passive Income for 2023

These three clean energy stocks may be down now, but not for long, offering substantial returns and passive income for…

Read more »

Oil pumps against sunset
Energy Stocks

Even at $60 Oil, These Energy Stocks Are Still Ridiculously Cheap

Oil stocks like Baytex Energy (TSX:BTE) are undervalued, even if crude drops.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Thursday, December 8

TSX stocks may remain volatile ahead of the U.S. inflation data and the Fed’s interest rate decision, which are due…

Read more »

The sun sets behind a high voltage telecom tower.
Energy Stocks

Is Algonquin a Good Long-Term Buy Right Now?

After a steep 44% drop, Algonquin boasts high-yielding dividends, and it might be a good asset to buy and hold…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

Whatever You Do, Don’t Sell Suncor Stock

Canada's oil sands king believes it can generate the highest long-term value for shareholders by keeping its retail business.

Read more »