Most Canadian energy stocks have witnessed a sharp recovery in recent months with growing hopes that the recent round of interest rate hikes is over. As central banks in the United States and Canada continue to hint towards potential interest rate cuts in the next year, economic growth could witness improvements, which could eventually strengthen the demand for energy products. While these expectations are driving energy stocks higher of late, many of them still look cheap based on their long-term fundamental outlook.
In this article, I’ll highlight two such top Canadian energy stocks you can buy right now and hold for years to come.
Secure Energy stock
Secure Energy Services (TSX: SES) is a Calgary-headquartered firm with a market cap of $2.5 billion. Besides its waste management services, the company also operates energy storage facilities and oil-gathering pipelines through its infrastructure network. Despite starting 2023 on a negative note by losing more than 10% of its value in the first quarter, SES stock has witnessed a sharp recovery in the last few months. With this, the stock now trades with 25.6% year-to-date gains at $8.83 per share.
In the third quarter, Secure Energy’s total revenue rose by nearly 2% YoY (year over year) to $427 million with the help of a strong utilization across its infrastructure network, exceeding Bay Street analysts’ expectations. Strong utilization, operational efficiencies, and recent price increases for its services also helped its adjusted quarterly EBITDA (earnings before interest, taxes, depreciation, and amortization) rise 3% YoY to $158 million. As a result, the company’s adjusted EBITDA margin in the last quarter also expanded to 37% from 36.8% a year ago.
As inflationary pressures continue to cool down, Secure Energy’s profitability is likely to improve further in the next year, which should help its share prices advance. Besides these expectations, SES’s 4.5% annualized dividend yield makes this energy stock even more attractive.
Pembina Pipeline stock
Pembina Pipeline (TSX: PPL) is another top Canadian energy infrastructure to buy right now. The company primarily focuses on providing energy transportation and midstream services. It currently has a market cap of $24.3 billion, as its stock trades at $44.32 per share after sliding by 3.6% so far in 2023. The recent optimism related to potential rate cuts has, however, driven its share prices up by 8.5% in the fourth quarter itself. At the current market price, PPL stock has an impressive 6% annualized dividend yield.
Pembina reported a 4.2% YoY gain in its net revenue in the third quarter this year to $1.07 billion, which is calculated by reducing the cost of goods sold, including product purchases, from its total revenue. Marketing segment tailwinds, record quarterly conventional pipelines volumes, and improving utilization help the energy infrastructure firm deliver a record quarterly adjusted EBITDA of $1.02 billion, reflecting about a 6% YoY increase. Encouraged by the strength in its financial results in recent quarters, Pembina Pipeline recently increased its full-year adjusted EBITDA guidance range to $3.75 billion to $3.85 billion, giving investors a reason to cheer.
Besides its strong financial growth trends, Pembina’s growing cash flow and strong balance sheet make it a very reliable energy stock to buy now and hold for the long term.
