2 Top Canadian Energy Stocks to Buy Right Now

If you want to invest in Canadian energy stocks, consider companies such as Enerflex that are trading at an attractive valuation.

| More on:
A worker overlooks an oil refinery plant.

Source: Getty Images

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.

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.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources and Enerflex. The Motley Fool has a disclosure policy.

More on Energy Stocks

edit Sale sign, value, discount
Energy Stocks

Buy Alert: Major Canadian Energy Stocks Are on Sale in June 2023 

Did you hear of a June sale? Well, Canadian energy stocks are trading near their lows in June 2023. It's…

Read more »

Dollar symbol and Canadian flag on keyboard
Energy Stocks

Canadian Blue-Chip Stocks: The Best of the Best for June 2023

TSX blue-chip stocks such as Enbridge can help you generate steady gains and benefit from a high dividend yield in…

Read more »

oil and gas pipeline
Energy Stocks

Pipeline to Prosperity: Invest in Enbridge Stock and TC Energy

Canadian pipeline stocks are buy-and-hold stocks, as oil and gas exports significantly contribute to Canada's GDP.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Monday, June 5

An early morning rally in oil prices could lift TSX energy stocks at the open today.

Read more »

oil and natural gas
Energy Stocks

These Canadian Energy Stocks Are Bargain Buys for 2023

Here are two of the best Canadian energy stocks you can buy on the dip in 2023 to hold for…

Read more »

Oil pumps against sunset
Energy Stocks

Freehold Royalties Stock: A Dependable 7.5% Monthly Dividend

Canadian investors hungry for income can trust Freehold Royalties Ltd. (TSX:FRU) stock for its fantastic monthly dividend in 2023.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Wednesday, May 31

The TSX index could remain volatile today, as discussions and final voting on the U.S. debt ceiling deal will remain…

Read more »

Energy Stocks

Better Dividend Buy: Suncor Energy or Canadian Natural Resources Stock?

Suncor Energy stock's additional 10.6% dividend raise in 2023 is doubtful. Canadian Natural Resources stock may outperform despite a current…

Read more »