2 Buy-the-Dip Energy Stocks to Buy

Suncor Energy (TSX:SU)(NYSE:SU) and Cenovus Energy (TSX:CVE)(NYSE:CVE) are two buy-the-dip energy stocks to buy now for big gains.

| More on:
oil tank at night

Image source: Getty Images

As the oil rally subsides, investors should look to buy energy stocks before the next potential rise. A US$100 oil environment will be a tide that will lift all ships in the oil field. 

Suncor Energy (TSX:SU)(NYSE:SU) and Cenovus Energy (TSX:CVE)(NYSE:CVE) are two buy-the-dip energy stocks to buy before the boom.

These energy stocks are due for a huge recovery when investors catch on to how cheap they are compared to their future outlook.

Going forward, expect these energy stocks to return to their 2020 highs, even with the occasional drop in near-term oil prices. Cenovus Energy and Suncor Energy both reported strong results in their latest quarter.

Cenovus Energy

Cenovus Energy, a Canadian producer of oil and natural gas, reported a profit in the third quarter of 2021 compared to a loss a year ago thanks to higher production and a recovery in demand for oil.

Cash flow from operating activities reached $2.14 billion in the third quarter, nearly three times higher than the previous year quarter. Adjusted cash flow increased from $407 million ($0.33 per share) to $2.34 billion ($1.16 per share) during the quarter ended September 30.

Net income was $551 million ($0.27 per share) in the third quarter of 2021, up from a loss of $194 million ($0.16 per share) in the third quarter of 2020.

Total upstream production reached 804,800 barrels of oil equivalent per day (boe/d) in the third quarter, up 70.6% from 471,799 boe/d a year earlier. Downstream flow nearly tripled to 554,100 barrels per day.

Cenovus president and CEO Alex Pourbaix said, “Our free funds flow capacity will support swiftly advancing toward our longer‐term net debt target of less than $8 billion, while balancing growth in shareholder returns.”

Cenovus doubled its dividend and announced a share-buyback plan of up to 10% of its shares.

With a forward P/E of only 7.2, Cenovus stock is among the cheapest energy stocks. For fiscal 2021, revenue is expected to increase by 242% to $45.24 billion and earnings per share are estimated to grow by 147.6% to $1.01 per share. 

Suncor Energy

Suncor Energy is back on investor radars after its disgrace in 2020. You can forget about losses and the 55% cut in dividends last year, as crude prices rebounded from pandemic lows.

The large-cap oil producer reported a profit in the third quarter of 2021 compared to a loss a year ago.

Operating funds increased from $1.2 billion ($0.76 per share) to $2.6 billion ($1.79 per share) during the quarter ended September 30.

Net income amounted to $877 million ($0.59 per share) in the third quarter of 2021, up from a net loss of $12 million ($0.01 per share) in the third quarter of 2020.

Total upstream production reached 698,600 barrels of oil equivalent per day (boe/d) in the third quarter, up from 616,200 boe/d a year earlier.

Suncor president and CEO Mark Little said, “Since the start of 2021, we have returned $2.6 billion to our shareholders through share repurchases and dividends and have reduced net debt by $3.1 billion, demonstrating significant progress towards fortifying our balance sheet and meeting our capital allocation targets for the year.”

Suncor has restored its dividend to pre-pandemic 2019 levels of $0.42 per share — a 100% increase over the previous quarter’s dividend.

On September 30, 2021, Suncor became the operator of Syncrude, one of the largest Canadian operations in the oil sands industry. Management said this is a critical step that should lead to greater integration, efficiency, and competitiveness where Suncor does business.

With a forward P/E of only eight, Cenovus stock is very cheap. For fiscal 2021, revenue is expected to increase by 60.3% to $40.16 billion and earnings per share are estimated to grow by 299.3% to $2.93 per share. 

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 Stephanie Bedard-Chateauneuf owns shares of Cenovus Energy Inc. The Motley Fool has no position in any of the stocks mentioned.

More on Energy Stocks

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

energy industry
Energy Stocks

2 TSX Energy Stocks to Buy Hand Over Fist Now

These two rallying TSX energy stocks can continue delivering robust returns to investors in the long term.

Read more »

green energy
Energy Stocks

1 Magnificent TSX Dividend Stock Down 37% to Buy and Hold Forever

This dividend stock has fallen significantly from poor results, but zoom in and there are some major improvements happening.

Read more »

oil tank at night
Energy Stocks

3 Energy Stocks Already Worth Your While

Here's why blue-chip TSX energy stocks such as Enbridge should be part of your equity portfolio in 2024.

Read more »

Solar panels and windmills
Energy Stocks

1 Beaten-Down Stock That Could Be the Best Bet in the TSX

This renewable energy stock could be one of the best buys you make this year, as the company starts to…

Read more »

Dice engraved with the words buy and sell
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Here's why Enbridge (TSX:ENB) remains a top dividend stock long-term investors may want to consider, despite current risks.

Read more »

Gas pipelines
Energy Stocks

If You Had Invested $5,000 in Enbridge Stock in 2018, This Is How Much You Would Have Today

Enbridge's high dividend yield hasn't made up for its dismal total returns.

Read more »

Bad apple with good apples
Energy Stocks

Avoid at All Costs: This Stock Is Portfolio Poison

A mid-cap stock commits to return more to shareholders, but some investors remember the suspension of dividends a few years…

Read more »