The Canadian energy stocks may have been quite the stomach-churning ride in the past year, but as some of the names look to break out, I do think the top plays in the space are becoming that much more interesting. Whether you’re looking for newfound momentum, relative value, a growthy dividend to go with a generous upfront yield, a nice portfolio diversifier, or some lower-beta plays to shelter from the next TSX Index-wide volatility storm, there seems to be something for everyone with the better energy players out there.
In this piece, we’ll check in on an intriguing Canadian energy stock that I think might be a decent value. And while shares have shown signs of strength, I wouldn’t yet hit the panic button, especially as the more resilient Canadian energy players look to power through the seemingly scary headwinds.
Of course, the big question is whether geopolitical developments will cause the discount on WCS (Western Canadian Select) to widen relative to WTI (West Texas Intermediate). Though the near-term noise may cause one to trade in or out of the names in any given week, I think it’s the long-term horizon that matters most. Either way, let’s get into the names that I view as quite compelling at the current price of admission.
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Canadian Natural Resources
First up, we have shares of Canadian Natural Resources (TSX: CNQ), which is a colossus in the Alberta energy patch, with its $104 billion market cap. Combined with a hefty 4.8% dividend yield and newfound momentum off those year-to-date lows, I’m inclined to view shares of CNQ as one of the more enticing Canadian energy stocks out there.
Of course, shares haven’t been as hot as some of its peers, with shares gaining just over 11% in the past year. But that’s exactly why I like the large-cap, especially as valuations across the industry inch that much higher. At 15.7 times trailing price-to-earnings (P/E), CNQ stock stands out as one of the cheaper mature energy plays. But, of course, this isn’t the cheapest it has gone for in the past couple of years.
While I do think the energy names are getting a tad on the pricey side, I do view CNQ stock as best-positioned to ride out an environment that could turn on any moment. Indeed, the firm has used its size to its advanage and while growth may not be as explosive as some of its smaller peers, I do find the dividend payout to be on very steady footing.
Time to buy CNQ stock?
If you like yield and relative value, I think it’s tough to pass on the name, especially as the firm continues to go after strategic acquisitions, which could further add to the firm’s already wide moat. While the beta is a tad higher than some of its peers’ (1.10), I think the added volatility is worth stomaching if you want a steady, growing dividend and better relative value.
While shares of CNQ could certainly be cheaper, I’m definitely not against picking up shares right here, especially as the firm looks to make the most out of management’s three paths to growth. Whether we’re talking about production expansion, longer-term projects, or buybacks and dividend hikes, CNQ certainly has the levers to keep investors aboard for years at a time.
