As 2025 comes to a close, you may be sitting on some leftover cash or recent dividends received in your investment portfolio. If you are looking to park that liquidity into a permanent home where it can earn serious returns in 2026, the Canadian energy patch is arguably the most exciting place to put $1,000 to work.
The energy sector is finishing a year defined by a wave of consolidations. Whether you want growth via acquisition, takeover speculation, or bulletproof income, these three TSX stocks are screaming buys right now.
Cenovus Energy (CVE) stock
Scale matters in this industry, and Cenovus Energy (TSX:CVE) has just become the no-brainer Canadian oil stock pick of the year. The $45.7 billion oil and gas-producing giant, which also boasts significant U.S. refining capacity, recently closed an aggressive $8.6 billion acquisition of MEG Energy in November.
The target’s operations were directly adjacent to Cenovus’s, making the case for significant merger synergies highly plausible. On December 11, the company released blockbuster 2026 guidance, forecasting total upstream production to jump to a staggering 945,000–985,000 barrels of oil equivalent per day (boe/d), up 4% year over year after adjusting for the MEG acquisition.
By swallowing MEG Energy, Cenovus has secured decades of low-decline reserves. Now that the heavy lifting of the deal is largely done, the company is pivoting toward a “cash harvest” phase. This could mean higher potential for deleveraging and significant dividend hikes.
Why is CVE an oil stock to buy? The oil stock trades at a forward price-earnings-to-growth (PEG) ratio of 0.7, a remarkably low multiple that implies shares are undervalued relative to the stock’s earnings growth potential. Merger benefits are yet to fully kick in, and management may sustain a generous dividend growth policy in 2026 if oil prices comply. Considering Cenovus has raised dividends at an average rate of 24% over the past three years and spots a 3.3% yield today, it offers a compelling mix of growth and income.
Tamarack Valley Energy (TVE) stock
If you are willing to take on slightly more risk for a potentially massive reward, Tamarack Valley (TSX:TVE) is the oil stock to watch right now.
The company has been in the news this month for two very telling reasons. First, the potential takeover target recently appointed Craig Bryksa to its Board of Directors. Bryksa is the former CEO of Veren Inc., a company that was successfully acquired by monthly dividend favourite Whitecap Resources earlier this year. When a company brings in a director experienced in closing deals, the market takes notice.
Second, on December 10, Tamarack adopted a Shareholder Rights Plan, commonly known as a “poison pill.” This defensive measure is usually taken when a company believes its stock is undervalued and wants to protect itself from a hostile, low-ball takeover.
Why is TVE stock a buy? TVE stock is up 65% so far this year, shrinking its dividend yield to 2.1%, but the valuation case remains strong. The company holds prime assets in the Clearwater heavy oil play and could do well if oil prices firm in 2026, even if a buyout doesn’t happen. The stock trades at a price-to-tangible-book-value multiple of just 1.5 times, compared to an industry average of 4.7 times tangible book value. Tamarack stock trades at a discount that smart money and potential acquirers won’t ignore for long.
Headwater Exploration (HWX) stock
Passive income-oriented investors may check out Headwater Exploration (TSX:HWX) stock. The company targets an 8% production growth per share in 2026 while maintaining a generous quarterly dividend that currently yields 4.9% annually.
Headwater Exploration stock has richly rewarded shareholders with a 12.3% total return during the past month. It shines in a fluctuating oil price environment because it maintains near-zero long-term debt, a rarity in a sector famous for its boom-and-bust debt cycles.
While other companies may stress over interest payments as oil weakens a bit, Headwater keeps finding oil and paying shareholders juicy dividend yields. Management doesn’t have to worry about sticky debt service costs. With an earnings payout rate under 60%, the HWX dividend is arguably one of the safest on the small-cap TSX energy board.
Why is HWX an oil stock to buy? Headwater trades at a forward PEG of 0.9, which implies slight undervaluation for such a pristine balance sheet. The company also raised its dividend by 10% for 2025. It could be a winning holding for 2026 if oil prices rebound.
