3 Biggest Canadian Energy Stocks to Consider Right Now

The current oil price strength indicates Canadian energy stocks still have steam left.

| More on:
oil and natural gas

Image source: Getty Images

Energy commodities are unstoppable this year. The Russia-Ukraine war has provided them with another significant impetus, driving them further higher in the last few weeks. For example, crude oil is up 60%, while natural gas prices have gained 170% in the last 12 months.

With Europe and the U.S. being reluctant to buy Russian energy, Canada could emerge as a reliable energy trade partner amid the ongoing war. Though concerns regarding scale and capacity remain, Canadian energy producers could ease the global supply squeeze to some extent.

Driven by higher energy commodity prices, TSX energy stocks have gone through the roof. They have notably outpaced their south-of-the-border counterparts, gaining 95% in the last 12 months versus U.S. energy stocks returning 60%.

Here are the three biggest Canadian energy stocks by market capitalization.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is the country’s biggest oil and gas producing company, with a $91.7 billion market cap. It has high quality, low decline assets with 17,000 million barrels of oil equivalent (MMboe) proved and probable reserves. It has returned 110% in the last year and 130% in the last five years.

The company aims to produce 1.3 MMboe/d in 2022, an increase of 5% year over year. Interestingly, higher energy prices and production could notably boost its earnings this year. It is already sitting with supreme financial growth and a strong balance sheet position.

CNQ plans to pay $3 per share in dividends this year to distribute excess cash, an increase of 50% compared to 2021. It pays increasing dividends driven by stable earnings growth. In 2020, when all the energy bigwigs suspended or trimmed dividends amid the pandemic, CNQ was among the very few who kept increasing shareholder payouts. CNQ stock currently yields 4%.

Enbridge

Canadian energy pipeline giant Enbridge (TSX:ENB)(NYSE:ENB) stands second in the universe with a $64.6 billion market cap.

Enbridge is a mature company that derives the majority of its earnings from fixed-fee, long-term contracts to move energy products. Its earnings have a relatively low correlation with oil and gas prices.

So, even if energy prices are rising, companies like Enbridge might not see as substantial an earnings increase as energy producers will. As a result, the stock has soared 26% in the last 12 months, notably underperforming peer TSX energy stocks.

However, if you are looking for dividends, Enbridge is one compelling opportunity. It yields 6%, way higher than its peers. It has increased dividends for the last 26 consecutive years. Notably, the company will likely keep its dividend growth streak intact, driven by its earnings visibility and low-risk business model.

Suncor Energy

Integrated energy giant Suncor Energy (TSX:SU)(NYSE:SU) is the country’s largest oil sands producer. Despite steep financial growth since the pandemic, the stock has remarkably underperformed peers in the last few months.

Investors’ concerns regarding its operational performance could be behind Suncor’s underperformance. A fire at its refinery and a fatal accident in January raised vital safety and operational issues at Suncor.

However, as we have seen a theme emerging in the sector, Suncor is also repaying debt with its incremental free cash flows. In addition, its balance sheet deleveraging and potential dividend hikes could create meaningful value for shareholders in the long term.

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.

The Motley Fool recommends CDN NATURAL RES and Enbridge. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Energy Stocks

Value for money
Energy Stocks

Energize Your Portfolio With 2 Value Stocks

Two energy stocks are great value buys if you’re looking to energize your portfolio with high dividend or enormous capital…

Read more »

oil and gas pipeline
Energy Stocks

What Energy Stocks Are the Best to Buy and Hold for Years?

Not all energy stocks are worth owning, but these two energy stocks are some of the best to buy and…

Read more »

canadian energy stocks can be good investments
Energy Stocks

2 Energy Companies to Hold for Decades

Despite the relative volatility in the sector and the changes it’s expected to go through in the next few decades,…

Read more »

oil and natural gas
Energy Stocks

Suncor Energy (TSX:SU) Stock: Still a Great Value

Suncor Energy (TSX:SU)(NYSE:SU) is looking like an incredible value today.

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Energy Stocks

Market Correction: 3 Value Stocks to Buy

The TSX fell 10% from March 2022 highs this week, leading to a technical correction in the market, which leaves…

Read more »

oil and natural gas
Energy Stocks

2 Canadian Energy Stocks That Pay Massive Dividends

Canadian energy stocks are gushing cash today. Here's two that are paying massive dividends to faithful shareholders right now.

Read more »

energy industry
Energy Stocks

Time to Buy Vermilion Energy Stock?

Vermilion Energy is on the mend. Is VET stock still a buy after the big rally?

Read more »

Oil pumps against sunset
Energy Stocks

3 Top TSX Energy Dividend Stocks to Buy Right Now

Energy investors have been in a sweet spot lately with rallying stocks and steep dividend raises.

Read more »