Energy companies are highly cyclical, as the performance of these stocks is tied to oil prices. So, energy stocks generally deliver outsized gains in a bull run but trail the broader indices in a bear market. Despite the volatility surrounding oil stocks, they remain popular among investors and account for almost a third of the world’s energy mix. Moreover, oil companies comprise 3.8% of the world economy.
After a stellar performance in 2022, most energy stocks are currently trading well below their 52-week highs, allowing you to buy the dip. Moreover, as several TSX energy companies pay shareholders a dividend, you can also benefit from a high yield in June 2023.
Here are the best TSX energy stocks you can buy right now for fast-growing passive income. Investors can look to hold these energy stocks in their TFSA (Tax-Free Savings Account), as any returns in the form of dividends and capital gains are sheltered from taxes.
Canadian Natural Resources stock
One of the most popular TSX stocks, Canadian Natural Resources (TSX:CNQ) has returned 1,650% to shareholders in the last 20 years after accounting for dividends. In this period, its dividends have increased by 20% annually, showcasing the resiliency of the company’s cash flows.
In the first quarter (Q1) of 2023, CNQ reported adjusted net earnings of $1.9 billion and $3.4 billion in adjusted funds flow. It currently pays shareholders an annual dividend of $3.60 per share, translating to a forward yield of 4.9%.
In the first four months of 2023, Canadian Natural Resources distributed around $2.8 billion to investors via share buybacks and dividends. CNQ stock is currently priced at a discount of 20% to consensus price targets.
Enbridge stock
One of the largest midstream companies globally, Enbridge (TSX:ENB) transports 30% of the oil produced in North America. It has a diversified base of cash-generating assets that have enabled Enbridge to increase dividends each year for the last 28 years. Right now, ENB stock pays shareholders an annual dividend of $3.55 per share, indicating a yield of over 7%.
As a majority of its cash flows are regulated, Enbridge has managed to sustain its dividend payouts across market cycles.
Enbridge is also looking to gain traction in the renewable energy space, which currently accounts for less than 4% of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization). The global shift towards clean energy solutions is expected to drive future cash flows higher and support dividend raises.
Cenovus Energy stock
The final TSX energy stock on my list is Cenovus (TSX:CVE), which offers a forward yield of 2.5%. It is the second-largest crude oil and natural gas producer in Canada. Its upstream operations include the oil sands projects in northern Alberta, thermal and conventional crude oil, as well as natural gas and natural gas liquids projects across Western Canada.
Additionally, downstream operations consist of upgrading and refining operations in the U.S. and Canada and commercial fuel operations in domestic markets. Its vertically integrated operations allow Cenovus to mitigate the volatility associated with crude oil.
Analysts remain bullish on CVE stock and expect shares to surge over 30% in the next 12 months.
