1 Top TSX Energy Stock to Buy and Hold Forever

Here’s one of the best TSX energy stocks investors can buy now and hold forever.

| More on:

Oil prices have seen a sharp correction lately — a few months after reaching their highest level since 2008. While the long-term demand outlook for traditional energy products remains high, concerns about a near-term recession are haunting oil investors. The commodity market correction has also taken a toll on the TSX energy stocks.

But given the positive long-term outlook for oil demand, the recent drop in energy stocks could be temporary, which investors can take as an opportunity to buy their favourite stocks cheap. In this article, I’ll highlight one of the most attractive oil stocks investors can buy and hold for the long term.

Top TSX energy stock to buy and hold forever

Imperial Oil (TSX:IMO)(NYSE:IMO) is a Calgary-headquartered integrated oil firm with a market cap of $37.9 billion. The company primarily focuses on the production, transportation, and sale of oil and gas through its upstream, downstream, and chemicals segments.

This TSX energy stock currently trades at $59.28 per share with nearly 30% year-to-date gains — thanks to its strong stock rally in the first quarter. Despite its strong financial growth trends, however, the stock hasn’t seen much appreciation lately. In the last three months, it has seen 9% value erosion.

Strong post-pandemic recovery

As the COVID-related restrictions on physical activity started affecting its operations and the demand for energy products, Imperial Oil’s 2020 revenue fell by 34.4% YoY (year over year) to $22.4 billion. But its revenue for the year still managed to exceed analysts’ estimates. As the pandemic also caused a sudden, massive drop in oil and gas prices, Street analysts expected the company to burn more than $800 million in cash that year. Nonetheless, the company reported a much narrower adjusted net loss of $385 million that year with the help of its focus on efficiencies and cost-cutting efforts.

As the demand and prices for energy products rapidly increased the following year, Imperial Oil’s total revenue jumped by nearly 68% YoY in 2021 to $237.6 million. Similarly, its adjusted earnings for the year stood at $3.65 per share, surpassing its pre-pandemic 2019 adjusted earnings of $2.88 per share.

After posting a solid post-pandemic recovery, Imperial Oil’s financial growth trends are continuing to improve in the ongoing year. In the June quarter, the company’s total revenue more than doubled from a year ago to $17.3 billion. During the quarter, its upstream production reached 413,000 gross oil equivalent barrels per day — its highest second0quarter (Q2) production level in more than three decades. This factor, along with its sustained strong downstream operating performance, helped Imperial Oil register a massive 626% YoY growth in its Q2 adjusted earnings to $3.63 per share — over 40% higher than Street’s estimates.

In the last year, Imperial Oil has increased its focus on the upstream portfolio with long-life, low-decline sand assets. This is one of the reasons it recently decided to sell its interest in XTO Energy Canada for about $1.9 billion. The company expects increased focus on the upstream portfolio to help it maximize shareholder value in the long run. Apart from these positive factors, Imperial Oil stock offers a decent dividend yield of around 2.3% at the current market price.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Energy Stocks

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 »

Pumpjack in Alberta Canada
Energy Stocks

1 Magnificent Energy Stock Down 17% to Buy and Hold Forever

Down over 17% from all-time highs, Headwater Exploration is a TSX energy stock that offers you a tasty dividend yield…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Cenovus Energy Stock a Good Buy?

Cenovus Energy (TSX:CVE) stock is primed for capital gains and strong total returns in 2025, driven by strategic buybacks and…

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

2 High-Yield Dividend Stocks That are Screaming Buys Right Now

Natural gas stocks like Peyto Exploration and Development are yielding above 7% today and look undervalued as natural gas strengthens.

Read more »

chart reflected in eyeglass lenses
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Cenovus?

Want to invest in Canadian energy? Canadian Natural Resources and Cenovus Energy are two of the largest, but which one…

Read more »

oil pump jack under night sky
Energy Stocks

Where Will Cenovus Stock Be in 1/3/5 Years? 

Let's dive into whether Cenovus (TSX:CVE) stock is worth buying right now and where this stock could be headed over…

Read more »