If there’s one thing (or should I say, person) that’s going to get investors moving, it’s Warren Buffett. The Oracle of Omaha had investors rushing towards oil after multiple reports came out stating that Buffett’s Berkshire Hathaway (NYSE:BRK.B)(NYSE:BRK.A) is nearing a deal to acquire Occidental Petroleum‘s (NYSE:OXY) petrochemical business for US$10 billion.
It would be the largest deal by Berkshire since the Alleghany acquisition in 2022 for US$13.7 billion. And it comes after years of saving, bringing the company’s cash to record highs. With the investment in OXY, however, other companies could be just as bullish for investors to consider. All while staying close to home.
CNQ
Buffett’s interest in energy continues to increase investor interest, and a key beneficiary should be Canadian Natural Resources (TSX:CNQ). The energy stock is one of Canada’s largest integrated producers, with a management actively returning capital through buybacks and dividends for its investors.
During the second quarter, production and net earnings both climbed, with adjusted funds flow reaching $3.3 billion. The company also closed several strategic acquisitions. However, cash remains low, though operating cash flow is high. Meanwhile, debt is moderate with a debt-to-equity of 45%.
Then there’s the value and income to consider. CNQ offers a 5.2% dividend yield at writing, supported by a solid 57% payout ratio. Plus, it still looks valuable trading at just 11.6 times earnings. Therefore, it’s a reasonable option, especially for a major oil and gas producer.
TOU
Another option to consider is Tourmaline Oil (TSX:TOU), the largest pure-play natural gas producer in Canada. The energy stock offers strong cash generation, low leverage, and a clear growth pathway. This comes from its position as a beneficiary of rising international gas prices, and new pipeline and export corridors.
During the second quarter, production jumped 10% year over year, with cash flow at $822.8 million and free cash flow hitting $316.9 million. The company did so well, in fact, that it announced a special $0.35 per share dividend and a quarterly base dividend of $0.50.
Yet the energy stock still looks valuable even after all this growth and income. It trades at forward 11.7 times earnings, while also providing a 3.2% dividend yield at writing. So you’re getting in on income and growth, all for a valuable price.
Bottom line
Yes, OXY is an exciting investment, but it’s also a headline maker. That’s why searching for value is a far better option, which is exactly what Warren Buffett is doing. In fact, let’s say you have $15,000 to put towards these two energy stocks on the TSX today. Here’s what that could look like from dividend income alone right now.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND (Annual/Share) | TOTAL PAYOUT (Annual) | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| TOU | $60.94 | 246 | $2.00 | $492 | Quarterly | $14,991.24 |
| CNQ | $44.22 | 339 | $2.35 | $796.65 | Quarterly | $14,990.58 |
So if you want to be a true Buffett investor, these other Canadian energy stocks could be better options. Always make sure to speak with your financial investor before making any decisions.
