Suncor (TSX:SU) and Canadian Natural Resources (TSX:CNQ) are down considerably from their 12-month highs. Contrarian investors are wondering if SU stock or CNQ stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
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Suncor
Suncor (TSX:SU) trades near $48.50 at the time of writing compared to $56 in early April. The stock is down about 10% in the past year and has bounced around between $43 and $58 over that timeframe.
The steep plunge in recent weeks is due to volatility in the oil market and uncertainty around how tariffs will impact the economy. Suncor is best known for its oil sands production operations, but the company also has refineries and operates a portfolio of Petro-Canada retail locations.
The integrated business structure is one reason the stock has held up better than many of its pure-play production peers. Suncor has also made good progress on its turnaround efforts under the guidance of its new chief executive officer. The company delivered record oil production, record refining throughput, and record refined product sales in 2024 while cutting operating expenses.
Suncor raised its dividend by 5% for 2025 and is now allocating 100% of excess cash flow to share buybacks. Investors who buy SU stock at the current level can get a dividend yield of 4.7%.
Canadian Natural Resources
CNRL trades near $40 per share at the time of writing. The stock is down about 9% in the past month, but is off 24% in the past 12 months.
Weak oil prices are largely to blame. West Texas Intermediate (WTI) oil trades near US$63 per barrel right now. It was above US$80 a year ago. Higher output from non-OPEC countries, including Canada and the United States, combined with reduced demand by China drove the price decline through the second half of 2024. Recession fears have extended the pullback in 2025. Analysts broadly expect the oil market to be in a surplus position until 2026.
CNRL’s US$6.5 billion purchase of Chevron’s Canadian assets late last year might be putting added pressure on the share price due to the continued slide in oil prices. The company took on extra debt to fund part of the deal, so it will have to delay its plan to return more excess cash to shareholders through buybacks. CNRL did, however, raise the dividend twice in 2024 and has already bumped it up again this year. Investors who buy CNQ stock at the current level can get a dividend yield of 5.8%. The board raised the dividend in each of the past 25 years.
Is one a better pick?
Income investors might want to make CNQ the first choice right now for the higher dividend yield. CNRL also has a better track record of dividend growth. Suncor slashed its distribution at the start of the pandemic, which upset many long-term holders of the stock.
Investors focused on total returns might consider splitting a new investment between the two stocks. Suncor’s turnaround effort is delivering impressive results, and there should be solid upside potential for the stock when oil prices rebound.
