3 Top Energy Stocks to Buy Right Now

The ideal time to buy the energy sector for growth may be long gone, and the best time to buy them for dividends has yet to arrive.

| More on:
pipe metal texture inside

Image source: Getty Images

The energy sector is still on the radar of most investors, but for a different reason now. A potential correction may encourage investors to make some tough decisions regarding their energy holdings.

Some investors may look to cash out when they are still on top, while others may aim to dock their energy capital into energy stocks better equipped to handle a correction. If you want to park your cash in the energy sector in its current state, three stocks should be on your radar.

A pipeline company

Enbridge (TSX:ENB) is a top energy pick in virtually any market, including the current one. It’s even more attractive right now, thanks to its 13% discount that has pushed the yield up to a mouthwatering number of 6.9%. Considering the trajectory of the stock, the yield may easily go up to (and beyond) 7% in a matter of weeks.

Another reason to consider Enbridge as a potential buy right now is its stability. As the largest pipeline company in North America that roughly a quarter of the US population relies upon for its energy needs, Enbridge might be a rock-solid long-term investment. Its dividend history is just as impressive, as the company has raised its payouts both generously and through very poor market conditions.

An oil and gas company

Cardinal Energy (TSX:CJ) is one of the top energy stocks you can buy right now because, despite its meteoric rise (over 2,000% in two years), it’s still one of the undervalued stocks of the energy sector. At least if we go by the price-to-earnings ratio, which is currently 5 for Cardinal Energy, it’s also trading at a 65% discount from its 2014 peak.

The discount and undervaluation combined might still be enough to push the stock further, and it can double your capital even if it undershoots. But this is where the current stagnant state of the energy sector comes in.

The stock may go up at a decent enough pace if the sector becomes strong and bullish for another spell, ideally one that lasts for more than a year. The attractive 6% yield is another reason to consider this stock, but the dividend history of the company is not stable enough for dividends to be the primary reason you buy this energy stock.

An integrated energy company

While Enbridge is a good pick for dividends and Cardinal a better buy for growth (in the right market circumstances), Suncor (TSX:SU) offers a little bit of both. The company “tarnished” its image a bit for some dividend investors when it slashed its payouts, but many considered its realistic decision motivated by the financial state of the company at the time a confident move.

The company has redeemed itself on the dividend front, as its payouts are currently much higher than the 2020 levels (before they are slashed).

This has pushed the yield up to an attractive number – 4.6%. As for growth potential, the stock is still quite undervalued and has outperformed the sector (since the start of 2023) by a significant margin. But since it’s following the same pattern, positive sentiment associated with the energy sector could push its value up at a decent pace.

Foolish takeaway

The energy sector may not have the same energy and momentum going forward that propelled it to the current level after the 2020 crash. But even with the chances of a correction higher than a bullish run, there is no certainty about how the sector will perform in the coming months/years. Fortunately, you can leverage the top stocks to ride a positive trend.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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 »