2 Top Energy Stocks Getting into the EV Boom

Two TSX energy stocks with a head start look to have a clear competitive advantage in the anticipated EV boom.

| More on:
Electric car being charged

Image source: Getty Images

Canada’s electric vehicle (EV) boom could come earlier than expected as two prominent energy firms gear up for a tremendous business opportunity. Statistica.com expects the country’s EV market to grow at a compound annual growth rate (CAGR) of 20.9% from 2022 to 2027. In five years, the projected market volume is around US$11.8 billion.

Imperial Oil Limited (TSX:IMO) recently formed a partnership with EV-charging firm Flo. They will set up EV-charging infrastructure in more than 2,000 Esso and Mobil gasoline stations throughout the country. Meanwhile, fuel retailer Parkland Corp. (TSX:PKI) announced plans to double the size of its ultra-fast EV charging network in Western Canada.

Pilot mode

Imperial Oil is among this year’s top-performing energy stocks. At $68.52 per share, the year-to-date gain is 52.8%. In 3 years, the overall return is 123.2% (30.6% CAGR). The $42.7 billion petroleum refiner has been paying dividends for more than 100 years and has raised them for 27 consecutive years.

American oil giant ExxonMobil owns 66.9% of this Canadian crude oil and natural gas producer. If you invest today, the dividend yield is a decent 2.47%. Dan Lyons, Imperial’s senior vice president of finance and administration, said, “A reliable and growing dividend remains the bedrock of our cash distribution strategy.” The 30% dividend hike after Q3 2022 was the largest in the stock’s history.  

Its vice-president of downstream, Jon Wetmore, said management has been watching the EV charging phase for some time now. They foresee an eventual pivot away from Imperial’s typical gas market. He adds that most EV charging activities will be in pilot mode until management can determine the best technique.

Imperial Oil should have no problems funding the EV program as it continues to generate record profits in 2022. In the nine months that ended September 30, 2022, net income soared 237% year over year to $5.6 billion.

Perfect business synergy

Parkland is installing 50 ultra-fast charging stations, up from 25, on highways and in major destinations (Vancouver Island to Calgary). With the move to double the size of its EV charging network, the $5.3 billion company wants to take the lead in Canada’s EV adoption.

Apart from supplying and marketing fuel and petroleum products, Parkland operates convenience stores. The EV charging stations perfectly complement the retail business and should enhance the customer experience. Its senior vice president of energy transition and corporate development, Darren Smart, said EV drivers will spend money on food and retail items while they wait for their cars to charge.

As of this writing, Parkland trades at $29.92 per share (-11.4% year to date) and pays a 4.43% dividend. Market analysts recommend a buy rating and have a 12-month average price target of $40, a return potential of 34% on top of the attractive dividend yield.

A Head Start

Canada’s goal is to become a leader in the EV sector, not just a major player. The federal and Ontario governments have pledged almost $1.7 billion to established OEMs (original equipment manufacturers) to build new zero-emission vehicles in the province.

For Imperial Oil and Parkland, a head start in the lucrative EV market could give them an important first-mover advantage. However, expect these energy stocks to compete intensely for consumers’ and investors’ attention.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Energy Stocks

A bull and bear face off.
Energy Stocks

2 Top TSX Energy Stocks to Buy as Crude Oil Is Set to Soar Higher

TSX energy stocks might keep topping charts in 2023 as well.

Read more »

Oil pumps against sunset
Energy Stocks

Is the Oil Boom Over?

The energy boom is over but dividend stocks like ARC Resources (TSX:ARX) are still attractive.

Read more »

Road signs rerouting traffic
Energy Stocks

2 High-Yield Energy Stocks I’d Buy and 1 I’d Avoid

I would buy energy stocks like Enbridge Inc (TSX:ENB) this year.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Friday, January 27

The TSX Composite is on track to close the fourth consecutive week on a positive note.

Read more »

Solar panels and windmills
Energy Stocks

Algonquin Stock Has Broken Investors’ Hearts, but I Think It Will Turn a Corner

AQN stock faces more uncertainty in 2023, but could be a compelling value pickup for income investors.

Read more »

energy industry
Energy Stocks

2 Top Energy Stocks to Buy Right Now

These energy companies remain immune to the economic and commodity down cycles.

Read more »

green power renewable energy
Energy Stocks

The 1 Dividend Stock Every Retiree Should Buy for Passive Income

Here's why I think Fortis is one top dividend stock that isn't getting the kind of love it deserves from…

Read more »

energy industry
Energy Stocks

Missed Out on Canadian Energy Stocks? My Best Dividend Stock to Buy and Hold

Altagas stock is my best stock to buy to get in on the Canadian energy stock rally, and a dividend…

Read more »