With increasing energy demands and the rising trend of adopting sustainable energy alternatives, the Canadian energy sector is currently one of the best places to invest. It offers flexibility, supports growth and acts as an effective hedge against volatility.
But to gain all these benefits, it is essential to choose the right stocks. Here are some that Canadian investors can go for.
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Enbridge
Enbridge (TSX:ENB) is a multinational energy infrastructure organization. Recent reports note that this company is teaming up with Divert to convert food waste into renewable energy. They have already invested US$100 million in this project and aim to build facilities all across the U.S.
Enbridge has also inaugurated its first facility in Washington. It will collect food waste from industrial food manufacturers, agricultural producers, retail consumers, restaurants, etc. and convert it into renewable natural gas.
In terms of the company’s core business, Enbridge recently entered an agreement to buy three Dominion Energy facilities, including the Public Service Co. of North Carolina, Questar Gas Co. and East Ohio Gas Co. This deal will double the current capacity of Enbridge and help it become one of the biggest natural gas providers in North America.
Apart from this, the Canadian energy giant had substantial financial growth in the second quarter (Q2) of 2023. Its GAAP (generally accepted accounting principles) earnings reached US$1.8 billion, which is substantially higher than last year’s same quarter’s US$0.5 billion. The company’s cash from operating activities also increased to US$3.4 billion, in comparison to Q2 2022’s US$2.5 billion.
For those betting on commodity prices remaining strong, Enbridge remains an intriguing way to play this space. Most investors view this stock as a bond-like proxy (which isn’t great when interest rates rise). But for those betting that interest rates will come down over the next year, the company’s valuation of only 24 times earnings seems very reasonable.
Suncor
Suncor (TSX:SU) is a Canadian international integrated energy organization. It operates via three segments: refining and marketing segments, exploration and production, and oil sands.
Almost 64% of Suncor shares are in the hands of institutional investors. Now, such companies only invest in stocks with significant long-term growth potential, that too after a lot of research and market analysis. Thus, such a high degree of institutional investment in this particular stock shows their faith in Suncor’s future performance. This is excellent news for investors who wish to invest in this company for the long term.
Apart from this, the organization has declared a dividend payout of $0.52 per common share for Q2 2023. The payout ratio is 34.54%, and the dividend yield is 4.5%. It is a bit higher than the 3.752% sectorial average, indicating the stock’s market-beating potential.
Over the long term, those betting on strength in the energy markets can’t go wrong owning either stock. These are two companies I think long-term investors can buy today and forget about for a decade or longer.
