Should Suncor Energy (TSX:SU) or Nutrien (TSX:NTR) Stock Be in Your Dividend Portfolio?

Suncor Inc. (TSX:SU) (NYSE:SU) and Nutrien Ltd. (TSX:NTR) (NYSE:NTR) are trading at attractive valuations. Is one a better buy?

| More on:

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

International trade disputes are driving up fears that we could be on the cusp of a global recession, pushing down the stock prices of a wide spectrum of top-quality companies.

Volatility is expected to continue in the near term, but investors with a buy-and-hold strategy might want to start nibbling on dividend growth stocks that are now at cheap levels.

Let’s take a look at Suncor Energy (TSX:SU)(NYSE:SU) and Nutrien (TSX:NTR)(NYSE:NTR) to see if one might be an interesting pick right now for a dividend portfolio.

Suncor

Suncor isn’t normally a name that comes up when people talk about dividend stocks, but the Canadian energy company has increased its payout for 17 years straight.

The integrated business model enables Suncor to generate solid cash flow even when oil prices are falling. This is due to the downstream refining and retail businesses that can benefit from lower input costs.

Suncor has a strong balance sheet with the power to buy strategic assets when the energy sector is under pressure. The added production then drives revenue and cash flow higher when the market recovers.

The stock is now trading at $38 per share compared to the $55 high it hit in 2018. Oil prices are under pressure amid ongoing fears that a global economic downturn might arrive and hit demand. However, any news of a trade deal between the U.S. and China could spark a new rally.

In the meantime, investors can pick up the stock for just 10.5 times earnings and secure a nice 4.4% dividend yield. Suncor raised the distribution by more than 16% for 2019, and another generous increase should be on the way in 2020.

Nutrien

Nutrien was formed at the beginning of 2018 through the merger of Potash Corp. and Agrium. The two Saskatchewan-based producers of crop nutrients already co-marketed their potash production together, so it made sense for the companies to join forces.

Nutrien is now the planet’s largest potash producer, giving it a competitive advantage when negotiating wholesale deals with countries such as China and India. The fertilizer sector witnessed a rough patch for several years, but that appears to have bottomed.

China and India each signed potash contracts in 2018 that were at higher prices than the previous year. The 2019 agreements are not complete, but pundits anticipate another price increase.

Nutrien also has a growing retail division that was part of Agrium. The business is expanding through acquisitions amid a wave of consolidation in the industry. Nutrien is also boosting its digital offerings to help farmers manage all aspects of their businesses.

The company earned US$2.69 per share last year and is targeting US$2.70-3.00 for 2019. The board raised the dividend twice in the past 12 months and investors should see steady hikes continue. Investors who buy today can lock in a 3.6% yield.

As crop nutrient prices continue to recover, margins should expand and Nutrien has the potential to be a free cash flow machine.

The current stock price is $66 per share compared to $75 last September. At less than 10 times trailing earnings, Nutrien appears oversold today.

Is one a better bet?

Nutrien and Suncor are leaders in their respective industries and should be attractive buy-and-hold picks for a dividend portfolio. At this point, both stocks appear oversold, so I would probably split a new investment between the two companies.

Should you invest $1,000 in Aritzia right now?

Before you buy stock in Aritzia, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Aritzia wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,391.46!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/7/25

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 Andrew Walker owns shares of Nutrien. Nutrien is a recommendation of Stock Advisor Canada.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Energy Stocks

canadian energy oil
Energy Stocks

Invest $21,000 in 1 Dividend Stock and Create $1,224 in Passive Income

This one dividend stock is a great option for those looking toward the future, with growth opportunities and dividends on…

Read more »

bulb idea thinking
Energy Stocks

What to Know About Canadian Energy Stocks in 2025

Energy stocks like these look promising in 2025, but there are still a few items investors need to watch.

Read more »

oil and natural gas
Energy Stocks

3 Top Energy Sector Stocks for Canadian Investors in 2025

These energy companies have a solid business model, generate growing cash flows and pay higher dividends to their shareholders.

Read more »

oil pump jack under night sky
Energy Stocks

1 Canadian Energy Stock Poised for Big Growth In 2025

Undervaluation, a heavy discount, and a favourable regional outlook might push one energy stock up, even if the sector is…

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

1 Canadian Energy Stock Poised for Big Growth in 2025

Enbridge stock is looking more and more attractive these days, especially with a 6% dividend yield on deck.

Read more »

Oil industry worker works in oilfield
Energy Stocks

Energy Sector Strength: A Canadian Producer That Can Thrive in Any Market

While gold stocks are the norm, relatively few Canadian energy stocks operate primarily outside the country. The ones that do…

Read more »

oil pump jack under night sky
Energy Stocks

Canadian Oil and Gas Stocks to Watch for 2025

Natural gas producer Tourmaline stands to benefit from a rise in natural gas prices as LNG Canada begins operation.

Read more »

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

Your Blueprint to Build a 6-Figure TFSA

Know the blueprint or near-perfect strategy on how to build and achieve a 6-figure TFSA.

Read more »