For many of our world’s major technological advancements, the oil industry has been the driving force in getting us to the present day.
Even though the world is now gradually shifting towards renewable energy sources,oil still plays a pivotal role in facilitating the energy needs of the world.
The equity investments are subject to market risks and may not be suitable for all investors. If you have any doubts as to the merits of an investment, you should seek advice from an independent financial advisor. So please invest at your own risk.
Why Oil and Gas Stocks?
The global energy sector is still dominated by oil companies and will continue to do so well into the future since renewable energy supply continues to be outpaced by demand
3.8% of the global economy is comprised of oil and gas companies.
The oil and gas sector is still a large part of the world economy and brought in a whopping $2.1 trillion in revenue in 2021 and contributes about 31.2 percent of the world’s global supply of energy.
As far as Canada is concerned, the country has the third-largest oil reserve in the world this makes up about 10% of the world’s proven reserves.
Behind Russia, Canada happens to be the fourth largest producer of oil.
In today’s review, we will look at several Canadian oil stocks that investors should look into.
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Best Canadian Oil Stocks
Canada has many energy companies involved in the oil business and it’s important to be able to distinguish how they are classified before looking to invest in any of them.
Oil companies are categorized into Upstream, Midstream, and Downstream oil companies.
- An upstream oil company is involved in the exploration efforts to find, drill and extract the crude oil.
- A midstream company is involved in the transportation and storage of the extracted oil.
- A downstream oil company is involved in the refining of the oil into useable products such as gasoline, jet fuel, and diesel.
In situations where an oil company engages in several of these activities, it’s referred to as an integrated oil company.
Some of the best oil stocks to look into include:
Enbridge Inc (TSX: ENB)
Enbridge Inc is a multinational pipeline company that was founded in 1973 and is based in Calgary, Canada.
It is one of the best midstream companies in Canada and also has the largest energy infrastructure in North America.
30% of all the oil produced in North America is transported by Enbridge Inc.
Enbridge Inc has an extensive pipeline with 192,000 miles of natural gas pipelines, natural gas liquids pipelines, and an additional 17,000 miles of active crude oil and liquid transportation pipelines.
Enbridge Inc has a market cap of $112 billion with assets worth CAD$163 billion (as of 2019).
Canadian natural resources had a CAD$50 billion revenue year in 2019 and recorded a net income of CAD$5.8 billion in the same year.
The company has a dividend yield of 6.62%, a forward dividend yield of 6.35%, and a dividend payout ratio of 140%.
Considering its dividend growth history and high dividend Enbridge is definitely an attractive company for investors.
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Canadian Natural Resources (TSE: CNQ)
Canadian natural resources is a Canadian oil and natural gas company that was founded in 1973 and is based in Calgary, Canada.
The company operates mainly in
- Western Canada primarily Saskatchewan, Alberta, Manitoba, and British Columbia including the Canadian oil sands.
- Offshore operations in the North Sea (U.K sector), Gabon and Cote d’ivoire.
Canadian natural resources are the largest heavy crude oil producer in Canada as well as the largest independent natural gas producer in western Canada.
Canadian natural resources have a market cap of $90.93 billion with assets worth $75 billion (as of 2020).
Canadian natural resources had a $17 billion revenue year in 2020 and recorded a net income of $435 million in the same year.
The company has a forward P/E ratio of about 8%, a forward dividend yield of 4.45%, and a dividend payout ratio of 26.56%.
Canadian natural resources have had a 21-year dividend growth streak and are worth looking into as an income stock.
Suncor Energy Inc (TSX: SU)
Suncor Energy Inc is a Canadian integrated energy company that was founded in 1979 and is based in Calgary, Canada.
The company specializes in producing synthetic crude from oil sands.
They are also the largest bitumen producers in the world.
The company has operations in Eastern Canada, Alberta, and even Colorado.
Suncor Energy Inc also happens to operate on one of the largest sand basins in the world, the Athabasca oil sands.
The company has 16,922 employees.
Suncor Energy Inc has a market cap of $71 billion with assets worth CAD$253 billion (as of 2019).
Suncor Energy Inc had a CAD$221 billion revenue year in 2021 and recorded a net income of CAD$194 billion in the same year.
The company has a dividend yield of 1.75%, a forward dividend yield of 4.79%, and a dividend payout ratio of 23.28%.
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Parkland Fuel Corporation (TSE: PKI)
The Parkland Fuel Corporation was founded in 1977 and as far as fuel and petroleum products are one of Canada’s largest independent suppliers and marketers.
The Parkland Fuel Corporation currently operates in 25 countries and currently operates about 2,400 retail sites including fuel stations and convenience stores.
The company leverages acquisition to spur its growth and this is what accounts for its 20 -50% average annual growth in revenue and earnings.
The Parkland Fuel Corporation has a market cap of $4.57. billion with assets worth $9.7 billion (as of 2020).
The company has a forward P/E ratio of about 10.34%, a forward dividend yield of 3.85%, and a dividend payout ratio of 72.21%
Due to the nature of its diversified portfolio as a downstream oil company, Parkland fuel makes for an attractive and stable oil stock investment.
Its important for Canadian investors to consider that although oil stocks are very good investments they are now high risk due tor the disruptions coming from the renewable energy sector.
Extra caution should be taken when choosing the right stock to invest in but it should also give investors comfort that the world is still some time away from doing away with fossil fuel and natural gas based energy sources.
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