Dividend Investors: Top Canadian Energy Stocks to Buy in December

Suncor Energy Inc (TSX:SU) is a great energy stock to own in December.

| More on:
Key Points
  • Canadian oil stocks are looking bullish in September.
  • Suncor Energy stock just delivered a massive earnings beat and rallied in the markets. It's still fairly cheap today.
  • Enbridge offers considerable dividend income and its business model is not vulnerable to oil price swings.
  • $1.8 billion in adjusted net income.
  • $1.5 in earnings per share (EPS), a beat by $0.34.
  • $3.8 billion in adjusted funds from operations (AFFO).
  • $3.8 billion in cash from operations (CFO).
  • 492,000 barrels of oil refined per day.
  • $1.5 billion returned to shareholders – $750 million in buybacks and $700 million in dividends.

Although most of these metrics declined on a year-over-year basis, they did not decline by a lot, indicating that Suncor was doing a good job even amid the relatively low oil prices observed in the third quarter. That’s the mark of a resilient oil company, and a big part of why I hold a small position in Suncor stock today.

canadian energy oil

Image source: Getty Images

Enbridge

Enbridge Inc (TSX: ENB) is a Canadian midstream company and natural gas utility. Its main business activity is shipping oil to buyers across North America via its vast network of oil pipelines, which total 29,104 kilometres in length. The company is the number one supplier of Canadian crude to the U.S., the number one supplier of natural gas utility services to Ontario, and the largest overall midstream company in North America.

Unlike Suncor, Enbridge stock has not been doing well in the markets this year. Up 12% year to date or 17% including dividends, its price performance has been far behind that of the TSX Index. The main appeal of this stock is its dividend, which yields 5.5% at today’s prices – far above the TSX average.

Despite that fact, Enbridge is actually doing pretty well as a business this year, with revenue up 82%, EBITDA up 17%, and operating earnings up 19% year over year. There seems to be a disconnect between fundamentals and price performance here. On the flip side, the stock trades at 23 times earnings, which is a little pricier than TSX oil stocks as a group. Enbridge arguably deserves this premium because its business model isn’t as vulnerable to commodity price swings as exploration and production companies are. Still, it is pricey on a sector-relative basis.

Personally, I would be quite comfortable owning Enbridge today, though I don’t actually own it (I do own Suncor). The valuation factor is not quite in this stock’s favour in my view.

December is shaping up to be a big month for Canadian energy stocks.

Last month, oil and gas investors were treated to a welcome surprise when Suncor Energy (TSX: SU) put out an earnings release that beat EPS expectations by an impressive 30%. Even though oil prices were not high at the time, Suncor stock rallied 6.5% the day after its earnings came out, leading to improved sentiment toward Canadian energy companies as a whole.

Which brings us to today. Oil prices are not rising, but they are stable enough for Canadian oil companies to make comfortable profits. With the Organization of Petroleum Exporting Countries (OPEC) choosing to keep output stable rather than increase it, as it had been doing earlier in the year, the fundamentals are in place for oil prices to remain stable, and for Canadian oil companies to put out good earnings. In this article, I share two oil stocks that are looking good in December.

Suncor Energy

Suncor Energy is a Canadian integrated oil and gas company involved in the extraction, sale, and refining of crude oil and natural gas. One of Canada’s most diversified energy companies, it is involved in all aspects of the oil and gas supply chain (except for midstream). Its stock yields 3.8% and the dividend has increased at a rate of an 11.8% CAGR over the last five years.

Suncor Energy’s most recent earnings release was a major beat, boasting metrics such as:

  • $1.8 billion in adjusted net income.
  • $1.5 in earnings per share (EPS), a beat by $0.34.
  • $3.8 billion in adjusted funds from operations (AFFO).
  • $3.8 billion in cash from operations (CFO).
  • 492,000 barrels of oil refined per day.
  • $1.5 billion returned to shareholders – $750 million in buybacks and $700 million in dividends.

Although most of these metrics declined on a year-over-year basis, they did not decline by a lot, indicating that Suncor was doing a good job even amid the relatively low oil prices observed in the third quarter. That’s the mark of a resilient oil company, and a big part of why I hold a small position in Suncor stock today.

Enbridge

Enbridge Inc (TSX: ENB) is a Canadian midstream company and natural gas utility. Its main business activity is shipping oil to buyers across North America via its vast network of oil pipelines, which total 29,104 kilometres in length. The company is the number one supplier of Canadian crude to the U.S., the number one supplier of natural gas utility services to Ontario, and the largest overall midstream company in North America.

Unlike Suncor, Enbridge stock has not been doing well in the markets this year. Up 12% year to date or 17% including dividends, its price performance has been far behind that of the TSX Index. The main appeal of this stock is its dividend, which yields 5.5% at today’s prices – far above the TSX average.

Despite that fact, Enbridge is actually doing pretty well as a business this year, with revenue up 82%, EBITDA up 17%, and operating earnings up 19% year over year. There seems to be a disconnect between fundamentals and price performance here. On the flip side, the stock trades at 23 times earnings, which is a little pricier than TSX oil stocks as a group. Enbridge arguably deserves this premium because its business model isn’t as vulnerable to commodity price swings as exploration and production companies are. Still, it is pricey on a sector-relative basis.

Personally, I would be quite comfortable owning Enbridge today, though I don’t actually own it (I do own Suncor). The valuation factor is not quite in this stock’s favour in my view.

Fool contributor Andrew Button owns Suncor Energy stock. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

More on Energy Stocks

Aerial view of a wind farm
Energy Stocks

Cautious Investors: 2 Safer High-Yield Dividend Stocks for Canadians

Canadians should add Enbridge and Brookfield Renewable Partners on their watchlist for potential buy-the-dip opportunities on market corrections.

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

Enbridge Stock: Should You Buy, Sell, or Hold It Right Now?

Enbridge just reaffirmed 2026 guidance and grew its project backlog to $50 billion. Here's what it means for the TSX…

Read more »

boy in bowtie and glasses gives positive thumbs up
Energy Stocks

Down 12% From Its All-Time High: Is This 5.5% Dividend Stock Now a Buy?

This TSX giant might be getting oversold.

Read more »

a man relaxes with his feet on a pile of books
Energy Stocks

2 TFSA Investing Tactics Used by Wealthy Canadians

These strategies can help build retirement wealth while reducing potential taxes.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Energy Stocks

Waiting Until 45 Instead of 35 to Invest $500 a Month Could Cost You $450,000 by 65

Starting with $500 a month at 35 instead of 45 could mean hundreds of thousands more at 65, even with…

Read more »

Electricity transmission towers with orange glowing wires against night sky
Energy Stocks

Canada Needs Far More Electricity: The Best TSX Power Stocks Won’t Wait for the Headlines

Canada’s rising electricity demand could reward the companies getting paid to generate power and expand the grid.

Read more »

Data Center Engineer Using Laptop Computer crypto mining
Energy Stocks

Why This 4.3% Dividend Stock Is Still a Forever Buy for Me

Waiting for the perfect correction can cost more than it saves, especially when a dividend stock keeps compounding without you.

Read more »

Nuclear power station cooling tower
Energy Stocks

The Next Nuclear Boom Is Already Underway: These TSX Stocks Could Lead It

AI is pushing data centre power demand so fast that nuclear energy and Canada’s nuclear supply chain are back in…

Read more »