With the growing global demand for energy, stocks from this sector can offer significant growth potential. Along with capital gains, many Canadian energy stocks often pay dividends or enhance shareholder value through share buybacks. These attributes make energy stocks a solid long-term bet.
So, if you plan to invest $2,500, here are three fundamentally strong TSX stocks to buy and hold forever.
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Energy stock #1: Canadian Natural Resources
Investors planning to invest in energy stocks could consider Canadian Natural Resources (TSX: CNQ) for both growth and growing dividend income. The oil and gas producer’s high-quality, diversified asset base and flexible capital-allocation strategy enable it to generate solid free cash flow to support its stock and distributions.
Canadian Natural Resources focuses on allocating capital and optimizing the product mix based on the highest return projects. Further, its diversified production mix, low maintenance capital requirements, and long-life, low-decline asset base allow it to generate strong returns on capital, reduce net debt, and enhance shareholder value.
Thanks to its solid financials, shares of Canadian Natural Resources grew at a compound annual growth rate (CAGR) of 23.6% in the last five years, delivering capital gains of 189.3%. Moreover, it has returned higher cash to its shareholders by increasing its dividends. Canadian Natural has increased its dividend for 25 consecutive years with a CAGR of 21%.
The energy company is targeting long-term production and capacity growth. Moreover, it is focusing on improving efficiency and driving high returns on capital projects. These measures will enable it to deliver strong free cash flow, pay higher dividends, and push its stock higher.
Energy stock #2: Brookfield Renewable Partners
Brookfield Renewable Partners (TSX: BEP.UN) is a top stock to capitalize on renewable power and decarbonization solutions. With its diverse portfolio of hydroelectric, solar, wind, and sustainable technologies, Brookfield Renewable Partners is well-positioned to benefit from increasing clean energy demand.
Energy demand continues to increase. Moreover, significant investments from major global technology firms in data centers and semiconductor manufacturing are creating a substantial demand for new renewable energy projects. Brookfield’s extensive scale and diversified geographic and technological capabilities uniquely position it to meet this growing demand and deliver high growth.
Further, Brookfield Renewable Partners’ highly contracted and durable cash flows, strong development pipeline, solid balance sheet, and access to diverse sources of capital to fund growth positions it well to deliver solid growth and enhance shareholder value through higher dividend payments.
Energy stock #3: ARC Resources
ARC Resources (TSX: ARX) is another compelling investment in the energy sector. The company is engaged in exploring and producing unconventional natural gas, natural gas liquids, condensate, and crude oil in Western Canada, focusing on developing assets with substantial hydrocarbon reserves known as resource plays.
Its portfolio includes resource-rich assets that offer significant growth potential. Further, ARC Resources benefits from low-cost operations, geographic diversification, and a large, concentrated asset base that enhances efficiency. Additionally, its strategic focus on expanding margins through LNG agreements and organic growth in condensate-rich assets positions it well for future growth.
The company aims to triple its free funds flow per share by 2028, repurchase shares, and consistently increase its dividend annually. With the potential for double-digit dividend growth and a conservative payout ratio, ARC Resources is well-positioned to create significant value for its shareholders.
