Cenovus Energy (TSX: CVE) has been on an upward trend over the past three months. Investors who missed the rebound off the April plunge are wondering if CVE stock is still cheap 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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Cenovus share price
Cenovus trades near $20 per share at the time of writing. The stock has now recovered the losses it sustained during the April pullback, but remains well below the $28 it fetched last summer.
Weak oil prices are to blame for most of the pain. West Texas Intermediate (WTI) traded above US$80 per barrel last year. It dipped below US$60 this spring and currently trades near US$68. Soft demand in China due to a struggling economy and global supply increases from non-OPEC producers put pressure on oil prices in 2024. Tariff uncertainty in 2025 has added to the volatility. Traders are concerned that the U.S. could slide into a recession and China’s economy could weaken further amid ongoing trade negotiations between the U.S. and the rest of the world. China and the U.S. are the largest consumers of oil.
Supply is also moving higher. OPEC is planning to increase production to reclaim some lost market share, even as prices remain under pressure. Non-OPEC producers, including Canada and the United States, continue to boost output. Analysts broadly expect the market to be in a surplus situation through the end of 2025 and into 2026. Geopolitical events could cause prices to surge, as we observed in recent weeks, but those spikes tend to be short-lived.
Earnings
Cenovus operates oil sands, offshore oil, conventional oil, natural gas, and natural gas liquids production assets. It also has refineries that turn crude oil into retail products.
Net earnings in Q1 2025 came in at $859 million compared to $1.2 billion in the same period last year. Lower oil prices offset improved total production volumes and higher overall refining throughput. Investors could see weaker results for Q2 due to the drop in the price of oil.
Upside
Cenovus is making good progress on a number of key development projects. In the oil sands group, the Narrows Lake site is expected to start production in Q3 2025. In addition, one well pad at the Sunrise site went online in April, and the Foster Creek optimization project is 75% complete and expected to go into operation in 2026.
The West White Rose offshore project is about 90% complete. First oil output from the project remains on schedule for Q2 2026. This is an important asset as it will add 45,000 barrels per day that can be sold at international pricing, rather than the discounted Western Canadian Select pricing that producers get on oil sold to the United States.
Dividends
The board raised the dividend by 11% for 2025, despite the volatility in the energy market. Optimism on the growth projects, along with breakeven levels being around US$45 for WTI, enable the board to continue to give shareholders higher payouts. Investors who buy CVE stock at the current price can get a dividend yield of 4%.
Time to buy?
Oil bulls might want to start nibbling at the current level and look to add to the position on any additional weakness. Investors who already own the stock should probably hold onto the shares. You get paid a solid dividend yield, and there is decent upside potential if oil prices move higher in the next year as new production comes online.
