After a stellar year in 2022, Canadian energy stocks have trailed the broader markets in recent months, as oil prices have cooled off. However, several oil-producing countries, including Saudi Arabia, have lowered production capacities to support higher prices in 2023.
The energy sector is highly cyclical, making oil stocks a high-risk bet this year, especially if recession fears come true. But you can consider investing in diversified TSX oil stocks to err on the side of caution while getting exposure to the energy sector.
Here are two top Canadian energy stocks you can buy right now.
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Enerflex stock
A company that offers energy infrastructure and energy transition solutions to natural gas markets in the Americas, Europe, and Asia, Enerflex (TSX: EFX) is valued at a market cap of $1 billion. These solutions include fabricated gas compression, gas processing, refrigeration, and power generation.
It also provides after-market parts and services for all products. Moreover, engineered systems and integrated turnkey products owned by Enerflex are offered to customers on a leased or built-own-operate-maintain basis.
Last October, Enerflex combined with Exterran, thereby creating an integrated company that provides energy infrastructure and transition solutions. This deal will allow Enerflex to increase sales by 56% year over year to $2.78 billion in 2023, with adjusted earnings of $1.34 per share.
In the last 10 years, Enerflex has spent over $1 billion on acquisitions and capital expenditures. Its cash-generating assets allow the midstream company to pay investors annual dividends of $0.10 per share, indicating a forward yield of 1.2%. The TSX stock slashed its dividends by 80% amid COVID-19, allowing it to strengthen its balance sheet.
Priced at six times forward earnings, Enerflex stock is trading at a discount of 75% to consensus price target estimates.
Canadian Natural Resources stock
The second TSX energy stock on my list is Canadian Natural Resources (TSX: CNQ), one of the largest companies in Canada. Since April 2003, CNQ stock has returned over 2,000% to shareholders in dividend-adjusted gains, easily outpacing the broader markets.
Despite these outsized gains, CNQ stock currently offers you a tasty dividend yield of 4.4%. Further, Canadian Natural Resources has raised dividends by 20% annually in the last 23 years, making it one of the top dividend stocks for TSX investors.
The company’s diversified asset base and flexible capital-allocation strategy allowed it to report record results in 2022. It reported product sales of $49.5 billion with net earnings of $11 billion in the last 12 months. Comparatively, in 2021, product sales and net earnings stood at $32.8 billion and $7.6 billion, respectively.
Its adjusted funds flow stood at $19.8 billion, with a free cash flow of $10.9 billion in 2022. This allowed Canadian Natural Resources to pay shareholders $4.9 billion in dividends that included a special dividend of $1.50 per share in August 2022.
Canadian Natural Resources maintains a robust balance sheet and reduced its net debt by $3.4 billion in 2022. In the last two years, its net debt has fallen by 50% to $10.7 billion.
Investors can expect dividend increases in the future, as CNQ continues to reduce balance sheet debt and allocated over $5 billion towards capital expenditures in 2023.
