Canadian energy stocks have experienced plenty of volatility over the last few months. The war in Iran sent oil prices sharply higher, only for them to pull back again as concerns around supply disruptions eased.
That kind of volatility can make it tempting to try to wait for a better opportunity to invest. However, for long-term investors, these swings often create opportunities to buy high-quality businesses at more attractive prices.
The key isn’t about trying to predict where oil prices will be next month. Instead, it’s identifying companies with strong underlying businesses that can continue creating value for years to come, regardless of the economic environment.
So, if you’re underweight in the energy sector and you’re looking for high-quality Canadian energy stocks to buy now that you don’t have to overpay for, here are two top picks to consider right now.
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One of the best Canadian energy stocks to buy and hold for years
If you’re looking for a high-quality Canadian energy stock that you can buy while it’s still cheap, Canadian Natural Resources (TSX: CNQ) is one of the best to consider.
After rallying rapidly while oil prices skyrocketed during the war, the stock has sold off significantly since the ceasefire news, making it a much more compelling investment today.
That matters because Canadian Natural Resources has earned its reputation as one of Canada’s premier energy companies.
A major reason is the quality of its assets. The company operates some of the lowest-cost production in the industry, with a break-even oil price that’s well below many of its peers. That allows the Canadian energy stock to remain profitable across a wide range of commodity-price environments while continuing to generate significant free cash flow.
In fact, management continues to return more of that cash flow directly to shareholders. Today, the company distributes 75% of its free cash flow, and analysts estimate it could start to return 100% of its free cash flow to investors within the next 12 to 18 months.
So with Canadian Natural Resources now trading roughly 20% off its 52-week high, and with its dividend yield now back above 4.4%, it’s easily one of the top Canadian energy stocks to buy today.
A compelling green energy stock with significant growth potential
While CNQ provides exposure to traditional energy, another high-quality Canadian energy stock that looks cheap today is Northland Power (TSX: NPI).
Northland Power is a renewable energy stock that has faced plenty of pressure over the last couple of years as higher interest rates, project delays, and a dividend reduction weighed on investor sentiment.
However, many of those concerns now appear to be reflected in the share price. More importantly, the company’s long-term growth pipeline remains intact.
Northland continues advancing several large renewable energy projects around the world, including offshore wind developments that are expected to significantly expand its generating capacity over the next few years.
So, as those projects come online, they have the potential to meaningfully increase cash flow and earnings.
At the same time, the long-term outlook for renewable energy remains attractive. Electricity demand continues rising as economies electrify, data centres expand, and governments invest in modernizing energy infrastructure.
So, while Northland may require more patience than Canadian Natural Resources, for investors willing to look beyond today’s uncertainty, it still appears to offer meaningful upside.
Plus, it pays investors to wait with a dividend that currently yields 3.3%.
So, if you’re looking for a high-potential Canadian energy stock that you can still buy at a reasonable valuation in this environment, Northland Power is one of the best options to consider.
