Better Buy: Suncor or Cenovus?

Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE) have soared in the year-over-year period.

| More on:
oil and natural gas

Image source: Getty Images

The S&P/TSX Capped Energy Index rose 1.88% on Friday, August 5. Today, I want to look at two of the top Canadian energy stocks: Suncor Energy (TSX:SU)(NYSE:SU) and Cenovus Energy (TSX:CVE)(NYSE:CVE). Which is the better buy in early August? Moreover, how does the broader Canadian energy sector look as we enter the final weeks of the summer of 2022?

Here’s why energy stocks have lost momentum this summer

West Texas Intermediate (WTI) crude dropped below US$90 a barrel last week. That was the first time WTI crude fell below this price point since Russia launched its invasion of Ukraine back in late February. This sparked a steady rise in oil and gas prices that also bolstered many top Canadian energy stocks.

Oil and gas prices have softened in the summer in response to recession fears and a push from OPEC (Organization of Petroleum Exporting Countries) to increase production. The oil and gas bull market may have calmed, but this does not mean investors should turn away from top energy stocks like Suncor and Cenovus.

Is Suncor Energy stock still worth buying in August 2022?

Suncor is a Calgary-based integrated energy company. In recent years, the company has boasted that its oil sands business will remain robust for the next century. Indeed, this is one of the most dependable stocks available to Canadians. Its shares have climbed 18% in 2022 as of close on August 5. The stock is up 62% in the year-over-year period.

This company released its second-quarter fiscal 2022 results on August 4. Suncor delivered adjusted funds from operations (AFFO) of $5.34 billion, or $3.80 per common share — up from AFFO of $2.36 billion, or $1.57 per common share in the previous year. That represented the highest quarterly AFFO in Suncor’s history. The oil sands business achieved record AFFO of $4.23 billion

Shares of this energy stock currently possess a price-to-earnings (P/E) ratio of 9.1. That puts Suncor in favourable value territory at the time of this writing. It offers a quarterly dividend of $0.47 per share, which represents a very solid 4.8% yield.

Cenovus: Is this energy stock undervalued?

Cenovus is another Calgary-based company. It develops, produces, and markets crude oil, natural gas liquids, and natural gas in North America and the Asia Pacific region. Shares of this energy stock have increased 30% so far in 2022. The stock has soared 113% year over year.

Investors got to see the company’s second-quarter 2022 earnings on July 28. Cash from operating activities surged 118% quarter over quarter to $2.97 billion. Meanwhile, adjusted funds flow jumped 20% to $3.09 billion. Moreover, net earnings increased 50% from Q1 2022 to $2.43 billion in the second quarter of fiscal 2022.

This energy stock last had an attractive P/E ratio of 10. Cenovus currently pays out a quarterly dividend of $0.105 per share. That represents a modest 1.9% yield.

Conclusion: Which is the better buy today?

Suncor and Cenovus stocks have both been on fire in the year-over-year period, largely due to soaring oil and gas prices. A looming recession could present a more challenging environment for this sector. In any case, I’m rolling with the more dependable Suncor for its value and far superior dividend in the first half of August.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Energy Stocks

man touches brain to show a good idea
Energy Stocks

1 No-Brainer Energy Stock to Buy With $500 Right Now

Should you buy a cyclical energy stock at its decade-high? Probably not. But read this before you make a decision.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Top Canadian Renewable Energy Stocks to Buy Now

Here are two top renewable energy stocks long-term investors can put in their portfolios and forget about for a decade…

Read more »

oil and gas pipeline
Energy Stocks

Where Will Enbridge Stock Be in 3 Years?

After 29 straight years of increasing its dividend and a current yield of 6%, here's why Enbridge is one of…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold for 2025?

Enbridge stock just hit a multi-year high.

Read more »

oil pump jack under night sky
Energy Stocks

Where Will CNQ Stock Be in 3 Years?

Here’s why CNQ stock could continue to outperform the broader market by a huge margin over the next three years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Where Will Imperial Oil Stock Be in 1 Year?

Imperial Oil is a TSX energy stock that has delivered market-thumping returns to shareholders over the last two decades.

Read more »