After a tough year for the most part in 2023, the broader Canadian market saw a surge in the last couple of months. Between October 27, 2023, and December 27, 2023, the S&P/TSX Composite Index climbed 12.16%. As of this writing, the Canadian benchmark index has gone on a slight dip, falling by 0.94% within the first few days of trading in 2024.
While that reflects a slight pullback in equity securities across most sectors, the Canadian energy industry seems to be picking pace. Some of the top Canadian energy stocks, previously on sale, have seen an uptick. In light of the positive momentum, here are three top picks that I would buy in January before they soar too high.
Suncor Energy
Suncor Energy (TSX:SU) saw a jump in its share prices as the company reported its fourth-quarter earnings report. One of the most significant announcements was its oil output being at its second-highest level ever. The Calgary-based $59.24 billion market capitalization integrated energy company reported that its upstream production in the fourth quarter (Q4) of fiscal 2023 jumped to 808,000 barrels per day.
Suncor Energy’s new chief executive officer came in with the goal of making significant improvements by cutting costs and exiting non-core businesses to prioritize the core production, refining, and retail operations.
As of this writing, Suncor Energy stock trades at $45.34 per share, up by 5.71% from its January 2, 2024 level. At current levels, it pays its shareholders their dividends at a juicy 4.81% dividend yield.
Enbridge
Enbridge (TSX:ENB) shares also rallied to outperform the broader market, gaining 2.12% between December 29, 2023, and January 3, 2024. The Calgary-based $104.21 billion market capitalization multinational pipeline and energy company owns and operates pipelines throughout the U.S. and Canada.
It is responsible for transporting a lot of the crude oil, natural gas, and natural gas liquids produced and used in the region.
The business performed well in 2023, with its management anticipating its $25 billion capital program and acquisitions to drive growth in its revenue and distributable cash flow. After another year of increasing dividends, Enbridge stock now has a 29-year dividend-growth streak.
As of this writing, the Canadian Dividend Aristocrat trades for $48.71 per share and pays its investors their quarterly payouts a juicy 7.51% dividend yield.
TC Energy
TC Energy (TSX:TRP) traded for as high as $74 per share in June of 2022. The stock then took a prolonged downturn, sliding down to as low as $45 per share in October 2023. When the broader market began rallying, TC Energy shares also saw an uptick. Between October 4, 2023, and December 27, 2023, TRP stock gained 18.04%. As of this writing, TRP stock trades at $52.79 per share.
The rally in its share prices coincided with the rebound in the bond market due to anticipated rate cuts in the U.S. and Canada this year. High inflation forced central banks in both countries to enact a series of aggressive interest rate hikes in the last year and a half.
Leading into 2024, the rate hikes paused. If rate cuts take place this year, it can indeed be a massive boost to profits for TC Energy because it relies on a huge debt load to fund large capital programs. Along with the completion of its Coastal GasLink project, things are looking up for the Canadian pipeline giant.
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Foolish takeaway
After a drop in share prices for energy stocks that were arguably overdone, these three major industry players are picking up pace again. While there is no telling whether further market volatility will lead to more pullbacks in the near term, analysts expect a surge in value stocks in 2024.
If analyst anticipation is correct, we might be seeing the start of the uptick. To this end, these TSX energy stocks might make good holdings to add to your self-directed portfolio in January 2024.
