Warning: No 2 Canadian Energy Stocks Look the Same Right Now

Comparing stocks like TORC Oil & Gas Ltd. (TSX:TOG) with major industry players yields some interesting data for dividend investors.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Canadian oil and gas space seems to be having a crisis of identity at the moment, with no clear norms emerging among the most popular energy stocks. From wildly varying P/E ratios to very different outlooks in earnings from stock to stock, there may still be bargains to be had in some desirable tickers, but shopping for oil and gas investments on the TSX index is no walk in the park right now.

The best of the rest

While ATCO (TSX:ACO.X) insiders have sold more shares than bought them over the last 12 months, there are a few good reasons to stack shares of this geographically diversified logistics, electricity, and pipelines stock. Looking past its somewhat bloated balance sheet, a strong track record (illustrated by a one-year past earnings growth of 49.8%) meets decent value for a moderately strong buy.

Value investors should look no further than a P/E of 15.8 times earnings and P/B of 1.4 times book, both of which are close to the going rate for the TSX index, while buyers looking for a good dividend stock should be pleased to see a yield of 3.57% augmented by a 6.4% expected annual growth in earnings. While it may not be much of a growth stock, the outlook is positive at least, and the rest of the stats make a good all-round mix.

One of the strongest plays for Canadian energy still has to be TORC Oil & Gas (TSX:TOG). An acceptable debt level of 22.4% of net worth blends nicely with such stats as a P/B of 0.6 times book, dividend yield of 6.14%, and 41.5% expected annual growth in earnings. More shares have been picked up than let go by TORC Oil & Gas insiders in the last three months, so a potential shareholder would be in good company.

Playing it safe

Doubtful investors who want to stick to tried-and-tested TSX index tickers should consider stocks like Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ). Canadian Natural Resources’s past-year earnings growth beat its five-year average (8.1% compared to -1.8%). While its level of debt compared to net worth has gone up over the past few years (37.5% compared to 64.5% today), it’s well covered by its operating cash flow.

In short, we have a fairly healthy stock that can go the distance, and trading with decent multiples, too, from a P/E of 17.4 times earnings to a market-beating P/B of 1.4 times book. Match a +50% discount off the future cash flow value with a dividend yield of 4.04% and 13% expected annual growth in earnings, and you have a solid, low-risk contender.

Then again, you could stick with the Big Two and stack shares in TSX index super-stock Enbridge (TSX:ENB)(NYSE:ENB). Again, a solid track record (see a five-year average past earnings growth of 33%) meets attractive value (shown by a P/B of 1.6 times book). A high dividend yield of 6.01% combined with a 34.7% expected annual growth in earnings make this stock a strong, defensive buy.

The bottom line

Investors looking to pack a TFSA, RRSP, RRIF, or other long-range plan will have to remain vigilant as the energy sector wades deeper into a potentially turbulent year. For example, value investors will have to weigh up how much TORC Oil & Gas’s high P/E of 52.4 times earnings bothers them, while TSX index super-stock investors will have to consider statistics such as Enbridge’s debt level of 88.7% of net worth and P/E of 33.7 times earnings.

Just Released! 5 Stocks Under $50 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $50 a share.

Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.

Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Enbridge is a recommendation of Stock Advisor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

Here’s How Many Shares of Brookfield Renewable You Should Own to Get $500 in Quarterly Dividends

If you want some dividends on deck, then consider this energy producer, which could provide that and more.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s Exactly How $15,000 in a TFSA Could Grow Into $215,000

If you're looking to grow your $15,000 investment into $200,000, here's exactly how to get it done.

Read more »

A worker gives a business presentation.
Dividend Stocks

Navigating Economic Headwinds and Buying the Dip

If you're looking to get in on the markets, but fearful of the market dip, then here's how to navigate…

Read more »

Canadian Dollars bills
Dividend Stocks

A 10% Dividend Stock Paying Cash Every Month

This dividend stock doesn't only offer a massive income, but a variety of investments during this volatile period.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Income-generating Stocks That Could Accelerate Your TFSA Growth in 2025

Generate tax-free passive income in your TFSA with these two stocks and grow your wealth.

Read more »

woman looks out at horizon
Dividend Stocks

How I’d Invest $8,500 in Canadian Financial Services to Create a Wealth Legacy

Canada’s financial services sector can help you create a wealth legacy from a less than $10,000 investment.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

Is BCE Stock a Buy for its Dividend Yield?

BCE stock looks pretty appealing with a 12% dividend yield, but there's more to consider.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA: Invest $15,000 in This TSX Stock and Create $962.55 in Annual Passive Income

If there's one TSX stock to buy right now, it's this long-term hold that's been around for over 100 years!

Read more »