Suncor (TSX:SU) and Cenovus (TSX:CVE) picked up a bit of a tailwind in recent weeks as oil prices moved higher after a deep downturn. Investors who missed the bounce are wondering if SU stock or CVE stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on energy stocks.
Suncor trades near $49.70 at the time of writing compared to $45 in April. The stock was as high as $58 in the past 12 months and has bounced around a lot with several double-digit percentage moves over that timeframe.
Weak oil prices are responsible for the pressure the stock has endured in the past year. West Texas Intermediate (WTI) oil trades near US$63 per barrel at the time of writing. It was as high as US$80 last year. Weak demand from China and higher production from major producers, including Canada and the United States, combined to put pressure on the market through most of 2024. This year, the story is more about fears that a global trade war will trigger a recession in the United States and put added pressure on the struggling Chinese economy. The two countries are the largest consumers of oil. At the same time, OPEC is adding supply to the market even as prices are weak.
On the operational side, investors are pleased with the progress Suncor is making on the turnaround plan launched by the current CEO two years ago. Suncor trimmed costs and increased production while improving its safety record. The integrated business structure with production, refining, and retail operations helps mitigate some of the margin pain on the upstream assets.
The overall business delivered a strong first quarter (Q1) in 2025. Oil production hit a Q1 record of 853,000 barrels per day (bbls/d). Refining throughput and refined product sales also hit Q1 records, reaching 483,000 bbls/d and 605,000 bbls/d, respectively.
This helped drive net earnings to $1.69 billion in the quarter compared to $1.61 billion in the same period last year. Suncor made good progress on strengthening the balance sheet. Net debt at the end of Q1 2025 was $7.56 billion compared to $9.55 billion at the same time last year.
Lower gas prices, along with Canadians deciding to vacation at home this summer, could drive a big boost in gasoline sales in the coming months at Suncor’s Petro-Canada retail locations. Cheap oil input costs are also a benefit for the refineries that turn the crude oil into various fuels and other products.
Suncor increased the dividend by about 5% for 2025 and is using excess cash to buy back stock. At the current share price, investors can get a dividend yield of 4.6%.
Cenovus
Cenovus has oil, natural gas, and natural gas liquids production operations, along with refining businesses. The company delivered solid Q1 2025 results. Total barrels of oil equivalent per day (BOE/d) production rose to $819,900 in the quarter compared to 800,900 in the same period last year. Refining throughput in the downstream operations came in at 665,400 bbls/d compared to $655,200 in Q1 2024.
A number of capital projects will reach completion in the next year to boost output. The West White Rose offshore project, for example, is also 90% complete and expected to start producing in Q2 2026.
Cenovus recently raised the dividend by 11%. Investors who buy CVE stock at the current level can get a dividend yield of 4.5%. Cenovus trades near $17.80 at the time of writing compared to a 12-month low near $14.50 and a high around $28.
The company recently evacuated employees from some Alberta operations due to wildfire threats. This will have an impact on Q2 production volumes.
Is one a better pick?
Suncor and Cenovus pay attractive dividends that should continue to grow. Suncor is probably the safer pick due to the benefits from the retail business and the strong operational performance across the three segments. Cenovus is potentially oversold right now and likely has better upside torque on a rebound in oil prices. Oil bulls might want to split a new investment between the two stocks.
