Best Energy Stocks In Canada For January 2023

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Dividend Earner

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Canada is renowned for the abundance of natural resources and the oil sector is definitely one of the primary sectors driving the Canadian economy. As such, there are many options for investors when it comes to energy stocks.

If you look at the TSX 60, 13 of the 60 stocks are energy stocks ( 21.67%) and the largest representation followed by financials and materials with 10 each. Over 50% of the index is concentrated in the 3 primary sectors driving the Canadian economy.

If you invest in Canada, it’s important you understand the energy sector and what the company’s business is. Some of the industries are dependent on others.  See the industry breakdown below followed by the top Canadian energy stocks.

  • Oil & Gas – Drilling
  • Oil & Gas – E&P
  • Oil & Gas – Integrated
  • Oil & Gas – Midstream
  • Oil & Gas – Services
  • Oil & Gas – Refining & Marketing

With that said, don’t forget we may have reached peak oil and the push for electric vehicles will change the landscape over time.

One of my primary data points when researching a stock include the Chowder Rule now as it establishes the potential total return of the company in the short term for both the dividend and the stock appreciation. Find the right stock for your portfolio.

Best Energy Stocks

A word of caution that bigger isn’t necessary better, but the larger Canadian oil stocks could provide stability.

While all of these stocks are oil stocks, know what you want to own. Some energy stocks are pure play drilling, some are just about transport and others have a full vertical integration all the way to the pump.

Finding An Undervalued Oil Stocks

It’s not easy to find an undervalued stock in this space. One way I use is to assess the current yield against the 5-year average. The capital intensive nature of the business, and the crude oil prices mostly have impact on future income as oppose to the valuation.

Basically, cashflow is king with these companies, and their ability to profit from crude oil at a certain price is key.

Note that not all dividend stocks screeners are created equal. Not many screeners focus on dividend data and dividend stength. You should consider a screener such as Dividend Snaspshot Screeners.

1. Enbridge

Enbridge Inc. is the largest energy infrastructure company in North America. It is Canada’s largest natural gas distributor engaging in the collection, transportation, processing and storage of oil and gas. Enbridge caters to 3.7 million customers in Ontario, Quebec, New Brunswick, and New York.

Enbridge owns an extensive network of about 192,000 miles of natural gas and NGL pipelines across North America and the Gulf of Mexico. Its crude oil and liquids transportation systems are huge comprising of more than 17,000 miles of active pipelines.

The company is known for its high quality liquids and natural gas infrastructure assets. In addition, Enbridge has 3.1 Bcf/d of processing capacity and 438 Bcf of net natural gas storage capacity. It also owns interests in nearly 3,000 MW of renewable generation capacity.

Key Investment Data

  • Ticker: TSE:ENB
  • Sector: Energy
  • Industry: Oil & Gas Midstream
  • Market Cap: 113.23B
  • Market Cap Group: Large Cap
  • P/E: 20.63
  • Dividend Yield: 6.35%

2. Canadian Natural Resources

Canadian Natural Resources is a diversified and independent energy producer in the world. It is the largest independent natural gas and heavy crude oil producer in Canada.  It operates a balanced mix of natural gas, light crude oil, heavy crude oil, and oil sands. The company holds some of the best oil sand assets in North America, particularly thermal in situ properties, having tremendous growth potential.

The company’s business can be broadly classified into Exploration and Production (North America, North Sea, offshore Africa), Oil Sands Mining and Upgrading, and Midstream and Refining segments. The Exploration and Production segment is Canadian Natural’s core business, while the other two businesses provide a nice diversification.

Canadian Natural Resources has a balanced mix of natural gas, light crude oil, heavy crude oil, bitumen, and SCO. The company also owns midstream assets consisting of two crude oil pipeline systems and cogeneration plants, which enables the transportation of heavy crude oil in international markets.

Key Investment Data

  • Ticker: TSE:CNQ
  • Sector: Energy
  • Industry: Oil & Gas E&P
  • Market Cap: 85.06B
  • Market Cap Group: Large Cap
  • P/E: 7.49
  • Dividend Yield: 4.43%

3. Suncor

Suncor Energy is one of the largest independent energy companies in the world engaging in oil sands operations, offshore oil and gas production, petroleum refining and marketing. It is the largest oil producer in Canada.

The company has operations across the entire value chain, including resource extraction, upgrading, refining and marketing, and midstream logistics. In addition, Suncor is involved in energy trading and operates a renewable energy business. Suncor owns offshore assets in key strategic geographic locations like the U.K. North Sea, Canada’s east coast and Norway.

Suncor Energy operates four refineries, an ethanol plant, wind farms, and over 1700 retail sites in North America and owns 940 mbpd oil production, 550 mbpd upgrading, and 460 mbpd refining capacities.

Key Investment Data

  • Ticker: TSE:SU
  • Sector: Energy
  • Industry: Oil & Gas Integrated
  • Market Cap: 58.59B
  • Market Cap Group: Large Cap
  • P/E: 7.84
  • Dividend Yield: 4.79%

4. TC Energy

TC Energy is a leading North American energy infrastructure company. It supplies more than 25% of natural gas consumed daily across North America. The company has a strong portfolio of diversified assets, storage facilities and power generation plants and operates one of North America’s largest natural gas pipelines networks extending to more than 57,500 miles.

TC Energy operates three complementary energy infrastructure businesses across three major geographies in North America. By generation type, TC’s assets can be divided into nuclear, natural gas and wind. The USA, Canada and Mexico are its core geographies and the company has access to North America’s two most prolific natural gas supply basins.

With more than 65 years of service, TC Energy is known for delivering energy in a safe and sustainable manner. Ownership of low-risk regulated cost-of-service businesses and long-term contracted energy infrastructure assets differentiate TC Energy from its peers.

Key Investment Data

  • Ticker: TSE:TRP
  • Sector: Energy
  • Industry: Oil & Gas Midstream
  • Market Cap: 58.33B
  • Market Cap Group: Large Cap
  • P/E: 17.67
  • Dividend Yield: 6.28%

5. Cenovus Energy

Cenovus Energy is a large integrated oil and gas company based in Canada. The company owns oil sands projects in northern Alberta as well as natural gas and oil fields in Alberta and British Columbia. It also owns a 50% stake in two U.S. refineries. Cenovus’ portfolio of assets got a boost with the acquisition of most of ConocoPhillips’ operations in Western Canada in 2017.

Cenovus Energy sells oil to industrial users, wholesalers and commodity purchasers, all around the world. An extensive network of pipelines, rail, and marine tankers transport the company's products. Cenovus is also developing new pipeline projects in Western Canada that will provide access to new buyers.

A vast portfolio of oil sands assets and Deep Basin natural gas and liquids assets in Western Canada should support production growth. Premium asset quality, operating excellence, an integrated model, and a strong reputation are Cenovus’ key competitive strengths.

Key Investment Data

  • Ticker: TSE:CVE
  • Sector: Energy
  • Industry: Oil & Gas Integrated
  • Market Cap: 49.66B
  • Market Cap Group: Large Cap
  • P/E: 10.00
  • Dividend Yield: 1.62%

5. Imperial Oil

Imperial is Canada's largest refiner of petroleum products. Imperial refines raw hydrocarbons into about 650 petroleum products essential to consumers and businesses: gasoline, diesel, heating oil, natural gas, lubricants, and chemicals used to make plastics.

Like you, Imperial Oil is concerned about the effects of chemicals on health and the environment and we have integrated Responsible Care® into our business practices. Imperial offers products and services to consumers across Canada as well as in export markets.  

In total, we manufacture and sell about a quarter of the petroleum products used every day by Canadians.  We are a leading marketer of fuels, lubricants, asphalts and specialty products.

Key Investment Data

  • Ticker: TSE:IMO
  • Sector: Energy
  • Industry: Oil & Gas Integrated
  • Market Cap: 39.78B
  • Market Cap Group: Large Cap
  • P/E: 6.72
  • Dividend Yield: 2.68%

6. Pembina Pipeline

Pembina Pipeline is a leading midstream and transportation service provider in North America. The company is known for providing safe and cost-effective transportation solutions since the last six decades.

The company offers a wide range of midstream and marketing services to the energy sector. It owns an extensive network of pipelines that transport crude oil, natural gas and natural gas liquids produced primarily in western Canada.

Pembina owns a large asset base consisting of pipelines and facilities, which is difficult for newcomers to replicate. As a leading energy infrastructure company, Pembina serves multiple basins and markets throughout Canada and the US. Pembina owns and operates an 18,000 km pipelines with a total capacity of 3 million barrels of oil equivalent per day.

Key Investment Data

  • Ticker: TSE:PPL
  • Sector: Energy
  • Industry: Oil & Gas Midstream
  • Market Cap: 26.62B
  • Market Cap Group: Large Cap
  • P/E: 10.03
  • Dividend Yield: 5.41%

7. Tourmaline Oil

Tourmaline Oil Corp. is a Canadian oil and natural gas exploration and production company. Tourmaline started operations in 2008 and is focused on long-term growth through an aggressive exploration, development, production and acquisition program in the western Canadian sedimentary basin.

With a transportation infrastructure in three core long-term growth areas – the Alberta Deep Basin, the Northeast British Columbia (NEBC) Montney complex and the Peace River Triassic Oil complex - Tourmaline is well-positioned to grow in these three core long-term growth areas.

Management believes Tourmaline has a number of competitive advantages that management expects will help the Company successfully execute its long-term business strategy including:

Key Investment Data

  • Ticker: TSE:TOU
  • Sector: Energy
  • Industry: Oil & Gas E&P
  • Market Cap: 22.36B
  • Market Cap Group: Large Cap
  • P/E: 4.10
  • Dividend Yield: 1.51%

8. Ovintiv

Ovintiv is a leading North American energy producer engaging in the exploration, development, and production of oil, NGLs, natural gas and other related activities in Canada and the USA.

It has a diversified portfolio of assets consisting of natural gas, oil, and natural gas liquids. As North America’s premier resource company, Encana operates an integrated supply chain with a good geographic reach.

The company has successfully transformed its natural gas portfolio to a balanced commodity mix since 2013. Its Montney operation has developed as a top global play driving significant corporate returns. This high quality multi-basin portfolio gives scale and cost advantages to Ovintiv. Its technology and innovation capabilities also provide an edge over the competition.

Key Investment Data

  • Ticker: TSE:OVV
  • Sector: Energy
  • Industry: Oil & Gas E&P
  • Market Cap: 16.55B
  • Market Cap Group: Large Cap
  • P/E: 3.56
  • Dividend Yield: 1.99%

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