10 Best Energy Stocks In Canada For Growth in May 2024

When it comes to energy resources, Canada is quite fortunate. It has the fourth-largest oil reserves and third-largest uranium reserves.

It’s the third-largest hydropower producer in the world, and over 60% of the country’s power comes from water, which has contributed to it becoming one of the top ten green countries in the world.

This diversity and range are also reflected in publicly traded energy companies, especially if we add electrical energy to the mix. You have a pretty decent range of the best energy stocks in Canada to invest in.

Energy Stocks In Canada

For the list below, I am going with a relatively broad definition of the word “energy.” Conventionally, the term energy stock refers mainly to oil and gas/fossil fuel companies and businesses that exclusively serve this market.

But a broader and more accurate description of energy businesses would include companies focusing on electrical energy, i.e., its production and distribution.

That includes renewable energy companies focusing on power generation sources other than conventional energy (oil or natural gas).

The collective pool of conventional energy stocks and what’s officially classified as utility stocks is quite sizeable and offers Canadian investors a wealth of dividend and growth options.

Best Energy Stocks in Canada

  • Enbridge (ENB.TO)
  • Canadian Natural Resources (CNQ.TO)
  • Suncor Energy (SU.TO)
  • TC Energy (TRP.TO)
  • Tourmaline Oil (TOU.TO)
  • Pembina Pipeline (PPL.TO)
  • Parkland (PKI.TO)
  • Parex Resources (PXT.TO)
  • Freehold Royalties (FRU.TO)
  • TerraVest Industries (TVK.TO)

1. Enbridge

  • Ticker: ENB.TO
  • Forward Dividend Yield: 7.35%
  • Dividend Payout Ratio: 185.90%
  • Dividend Yield (12-Month Trailing): 7.56%
  • Upcoming Dividend Date: Mar 01, 2024
  • Market Cap: $98.56 Billion

Enbridge, the largest energy company in Canada by market capitalization and one of the largest midstream companies in the world, is arguably one of the most stable energy giants in North America, thanks to its business model and the volume of energy it moves across the region.

This one company moves 30% of the crude oil produced in North America and 20% of the natural gas consumed in the US.

Its revenue/business segment mix also includes gas utility (distribution business) and renewables, which is the newest addition to the Enbridge family and may nicely offset its environmental liability from its conventional energy business.

It’s one of the most beloved dividend stocks in the energy sector because it offers a powerful combination of a generous yield, dividend sustainability (endorsed by a stellar history as an aristocrat), and dividend growth.

Also, roughly half of its earnings come from regulated businesses, which further endorses the financial viability of its dividends.

Its financial growth is decent, and its revenues grew by over 54% between 2016 and 2022. The stock itself is currently heavily discounted, and as per several projections, it’s trading below the target price. The valuation is also hovering near the fair value.

If you are buying Enbridge for its dividends, it’s an exceptional choice. But don’t rely too much on its capital appreciation potential.

The last true bullish run of the stock was over eight years ago, but it was quite consistent. A repeat of that might be a very attractive bonus on what’s mainly a dividend-based investment “package.”

2. Canadian Natural Resources

Canadian Natural Resources Stock
  • Ticker: CNQ.TO
  • Forward Dividend Yield: 4.08%
  • Dividend Payout Ratio: 49.78%
  • Dividend Yield (12-Month Trailing): 4.33%
  • Upcoming Dividend Date: Jan 05, 2024
  • Market Cap: $87.64 Billion

Canadian Natural Resources markets itself as one of the largest natural gas producers and one of the largest heavy crude oil producers in Canada.

It’s also one of the largest energy producers in the country – 2nd largest natural gas and largest crude oil producer. In 2022, it was the only Canadian company to produce 5 billion barrels of oil equivalent (BOE).

Its product and portfolio diversification are another two strengths. While most of its assets are in North America, it also has a presence (offshore) near Africa and the UK. Its assets are viable for several decades at the current level of production. 

Canadian Natural Resources proved to be one of the most resilient upstream businesses in the last decade.

Between June 2014 and January 2020 (before COVID), the capped Energy Index had slumped over 60%, and while Canadian Natural Resources did fall in 2014, along with the other energy stocks in Canada, it made a (nearly) full recovery by 2018.

It was also among the energy stocks that experienced significant growth post-pandemic, but despite that growth, it’s almost undervalued right now. So, the current height may become the new baseline for the stock’s performance.

The financials of the company are also quite healthy. Between 2016 and 2022, its sales grew by 4.5x, and its net earnings turned a corner around from negative to over $10 billion. The healthy financials are also reflected in the stable payout ratio of its dividends.

You might be attracted to its resilience and the combination of growth and dividends it offers, but it’s important to remember that as an upstream company, it’s quite vulnerable to oil price fluctuations.

3. Suncor Energy

Suncor Energy Stock
  • Ticker: SU.TO
  • Forward Dividend Yield: 4.48%
  • Dividend Payout Ratio: 43.84%
  • Dividend Yield (12-Month Trailing): 4.78%
  • Upcoming Dividend Date: Dec 22, 2023
  • Market Cap: $55.50 Billion

Suncor is one of the largest integrated oil companies in Canada and among the largest oil sands players in the region. Its oil sands reserves are expected to last at least 26 more years, and the exploration activities in the meanwhile may push this life further.

Apart from its Canadian portfolio, the company has interests in Syria, Libya, and the UK. It also has about 1,900 Petro-Canada retail and wholesale sites in its portfolio.

It fell out of favour with many investors when it cut by 55% in 2020 when the energy market was still dealing with the COVID pressure. The company has redeemed itself in that regard, and its payouts are now roughly 12% higher than they were before the cut.

The company is also quite attractively valued right now, with an EV to sales of just 1.4x. It’s still trailing far behind its price estimate, which means there is adequate room for growth in the future.

The yield is also quite decent, and the payout ratio is rock-solid. The financial growth is also quite decent. Its operating revenues doubled between 2016 and 2022 and between COVID year (2020) and 2022.

You may like Suncor for its valuation, but remember that its long-term growth potential might not be very promising.

Even before COVID, the stock offered relatively minimal year-to-year or consistent long-term growth. However, it’s a solid dividend pick.

4. TC Energy

  • Ticker: TRP.TO
  • Forward Dividend Yield: 7.51%
  • Dividend Payout Ratio: 406.67%
  • Dividend Yield (12-Month Trailing): 7.51%
  • Upcoming Dividend Date: Jan 31, 2024
  • Market Cap: $52.85 Billion

TC Energy is quite similar to Enbridge. Not only is it mainly a midstream company that transports roughly a quarter of the natural gas used in North America, but it also has a secondary power business with a production capacity of 4.2 GW and a focus on sustainability.

However, unlike Enbridge, TC Energy focuses more on natural gas and doesn’t have a dedicated utility business.

As a stock, TC Energy is both resilient and growth-oriented. It was one of the few stocks that bounced back (from the 2014 fall) before the COVID. It was also one of the few energy stocks that didn’t experience a powerful bullish momentum in the post-pandemic market, so the “stability” cuts both ways.

One major benefit of this underperformance and the current massive discount that lost the company about a third of its market value is the yield, which has soared well above 7.5%.

The discount did have a positive impact on valuation, but not as much as a value investor would like to see. The company’s financials are solid and comparable to a utility company, as over 79% of them come from regulated assets.

Over 96% of its revenue is from contracted sources (both regulated and unregulated), which further endorses its financial stability and the sustainability of its dividends.

TC Energy is a solid pick for a number of reasons – its dividends, capital growth potential, and even its current discount. But one of its most significant strengths is its heavy lean on natural gas (over 90% of revenues).

As the cleaner fossil fuel, natural gas demand might outlast oil demand by decades, making it an amazing long-term pick for your portfolio.

5. Tourmaline Oil

Tourmaline Oil Corp logo
  • Ticker: TOU.TO
  • Forward Dividend Yield: 1.47%
  • Dividend Payout Ratio: 11.98%
  • Dividend Yield (12-Month Trailing): 1.82%
  • Upcoming Dividend Date: Dec 29, 2023
  • Market Cap: $18.58 Billion

Tourmaline Oil is the largest natural gas producer in Canada. It has reserves of about 20.7 billion cubic feet. It’s more than four times the annual consumption of Canada and the largest reserves of any energy company in the country.

Even more amazing is the fact that the company has a large enough drilling inventory to last 75 years.

To summarize, there is a high chance that Tourmaline may remain the top producer or at least one of the top producers of natural gas in Canada. It can also ramp up its production by drilling more wells. It’s also a low-cost producer, which further strengthens its already impressive finances.

Between 2016 and 2022, the company grew its production by 140% and total sales by over 70%. The stock also grew over 200% over that period, but the bulk of that growth happened during the pandemic, and the major catalyst was favourable market dynamics.

However, the stock is quite attractively valued right now, so the chances of a slump until it’s a sector-wide thing are low.

The company is quite generous with special dividends, especially in a good year like 2022, but that’s not the market of a reliable dividend stock.

If you are considering this stock, you should understand that its fundamental strengths didn’t prevent the company from sinking 80% from its 2014 value (till 2020), and when the market was bullish, it rose almost 1,000% in less than three years. So, you should evaluate it through the market’s lens.

6. Pembina Pipeline

Pembina Pipeline Stock
  • Ticker: PPL.TO
  • Forward Dividend Yield: 6.28%
  • Dividend Payout Ratio: 54.04%
  • Dividend Yield (12-Month Trailing): 5.79%
  • Upcoming Dividend Date: Dec 29, 2023
  • Market Cap: $24.74 Billion

Another pipeline company on this list that is counted among the best energy stocks in Canada is Pembina Pipeline, but that’s not the only business of the company.

In fact, it makes up roughly 60% of the company’s operations. Facilities, primarily its natural gas processing facility (with a daily capacity of 5.4 bcf) and marketing, make up the rest of the operations.

The company’s transport mix is about three-fourths liquids (including NGLs) and one-fourth natural gas, and at least 70% of its business is tied to the take-or-pay model, which makes its financials more resilient against weak markets.

This is good news for investors buying it for its dividends. However, you should know that the company switched from monthly dividends to the more prevalent quarterly model.

Pembina is also a stock worth considering for its long-term capital appreciation potential.

It’s currently quite attractively valued (though not undervalued). Its financials are healthy, but they haven’t grown nearly as consistently over the past decade as the stock itself did.

It’s a good pick for the combination of dividends and capital appreciation potential, at least compared to other energy stocks, and it’s quite resilient.

But you should also take into account its financial weakness and a curious lack of cash reserves/investments.

7. Parkland

Parkland Fuel Stock logo
  • Ticker: PKI.TO
  • Forward Dividend Yield: 3.69%
  • Dividend Payout Ratio: 69.27%
  • Dividend Yield (12-Month Trailing): 2.97%
  • Upcoming Dividend Date: Jan 15, 2024
  • Market Cap: $7.94 Billion

Parkland is engaged in both downstream and midstream operations. Its midstream operations include refining and supply chain, while its downstream operation is fuel retailing, which is massive.

The company has over 4,000 locations in its portfolio, spanning over 25 countries, though the bulk of the portfolio is in Canada and the US.

The company works with several local and internationally recognized brands, including Chevron.

Its revenue mix is healthy and comprised of three components – retail (fuel stations), commercial (heating fuels, lubricants, etc.), and refining, which is 85% contracted out, making it a flexible business segment.

Thanks to the nature of its business model, Parkland didn’t suffer along with the rest of the sector as it fell in 2014-2015. In fact, the stock grew by over 150% between Jan 2014 and Jan 2020.

However, it did feel the full brunt of COVID and has been struggling ever since, although the financials have improved significantly over the years. Between 2016 and 2022, the net earnings grew by over seven times. That’s about 100% each year.

The hefty discount and good value are not the only things that might make this stock more appealing to you. Its dividends and the latent growth potential that may emerge once the market and negative financial forces like interest rates have stabilized more are more compelling reasons to consider this stock. 

8. Parex Resources

Parex Resources Stock
  • Ticker: PXT.TO
  • Forward Dividend Yield: 5.71%
  • Dividend Payout Ratio: 19.48%
  • Dividend Yield (12-Month Trailing): 4.65%
  • Upcoming Dividend Date: Dec 29, 2023
  • Market Cap: $2.13 Billion

Parex Resources is a Canadian business that operates primarily in Colombia and is one of the largest independent oil and gas companies in the country. It has a massive land position – 5.5 million net acres.

The bulk of the company’s oil is exported (fair market value), and the low-cost operations in Colombia result in good financial margins.

The company grew its revenues by over 300% between 2016 and 2022, while the expenses have only increased by about 10% over that period.

But the most unique thing about this company’s financials is the lack of debt. The company has less than $10 million in debt right now and almost 20 times the cash reserves/investments.

At the time of writing this, Parex is perhaps the most undervalued stock in the energy sector, at least among the mid-caps and large-caps. It’s trading at just four times price-to-earnings and 1.6 times EV to sales.

All of these fundamental strengths, plus the exceptional performance of the stock – 350% growth in the last ten years, make it one of the most appealing energy stocks in Canada.

However, you should realize the risk the company is taking operating in a politically unstable country like Colombia. However, it’s partly offset by the fact that the company has been operating there for well over a decade.

9. Freehold Royalties

Freehold Royalties Ltd.
  • Ticker: FRU.TO
  • Forward Dividend Yield: 7.38%
  • Dividend Payout Ratio: 100.94%
  • Dividend Yield (12-Month Trailing): 7.95%
  • Upcoming Dividend Date: Feb 15, 2024
  • Market Cap: $2.05 Billion

Freehold Royalties offer you a unique way to invest in energy, i.e., by investing in the land that can be used for drilling. The company has a massive land position in Canada – 6.4 million gross acres and a decent land position in the US – 0.9 million drilling acres.

Currently, the company is generating most of its funds from oil and Natural Gas Liquids (NGLs), about 80%, and the rest comes from natural gas. The regional revenue breakdown is more balanced, with 60% and 40% coming from Canada and the US, respectively.

From a performance perspective, Freehold Royalties has tracked the performance of the energy index quite faithfully over the past decade. But it’s a much better buy for its dividends.

It has raised its payouts by about 600% from its mid-2020 dividends. But it also slashed its payouts by 71% when the market got tough.

Freehold Royalties are a good way to invest in energy if your goal is to track the overall performance of the sector and receive dividends that accurately represent the state of the market.

But you should consider the risk of a high debt compared to its virtually non-existent cash and investments.

10. TerraVest Industries

Terravest Industries Stock
  • Ticker: TVK.TO
  • Forward Dividend Yield: 1.41%
  • Dividend Payout Ratio: 19.00%
  • Dividend Yield (12-Month Trailing): 0.95%
  • Upcoming Dividend Date: Apr 10, 2024
  • Market Cap: $992.46 Million

The last energy stock on this list is less energy and more industrial in nature. It’s officially part of the energy sector because most of the products it makes are for energy sector companies.

This includes infrastructure elements and transport for ammonia and Natural Gas Liquids (NGL). But it’s also a major producer of home heating products.

This disassociation from the energy sector has almost always been in the company’s favour.

Unlike most other energy companies, it has experienced almost consistent growth in the last decade and grew by about 785% between August 2013 and August 2023, and if you add the dividends, the returns become even more significant.

It also didn’t experience the powerful bullish phase in the post-pandemic market, which will save it from the subsequent correction as well (if one is coming). It has been experiencing a surge in its revenues over the past couple of years, making its dividends even more financially viable.

The stock carries a decent amount of debt, but it’s quite manageable considering its revenue surge.

It might be overly optimistic to expect the same level of growth in the next decade as the company delivered in the past, but you may see capital appreciation far more aggressive compared to most other energy stocks, especially now that the bull run has stalled.

Investor Considerations For Energy Stocks

Investors stand at the crossroads of opportunity and uncertainty as they evaluate energy stocks in Canada. The transition to renewable energy offers growth potential, but traditional fossil fuel companies still present viable investment options.

Dividend sustainability, growth prospects, and environmental considerations guide investment decisions. As the energy sector diversifies, understanding the financial implications of renewable projects and the long-term viability of fossil fuel businesses becomes paramount.

The concept of stranded assets—resources that lose value due to regulatory changes and climate concerns—adds a layer of complexity to energy investment decisions. Investors must assess the carbon intensity of their portfolios, account for potential regulatory shifts, and identify companies well-positioned for a sustainable energy future.

FAQs

Which Canadian small cap oil stocks are worth considering?

For investors interested in Canadian small cap oil stocks, Parex Resources (PXT.TO) and TerraVest Industries (TVK.TO) are worth considering. Parex Resources, with its focus on independent oil and gas operations in Colombia, has shown impressive growth and financial resilience.

Are Canadian energy dividend stocks a good investment?

Companies like Enbridge (ENB.TO) and TC Energy (TRP.TO) have established histories of paying reliable dividends. These dividends are often supported by regulated business segments and contracted revenue streams, contributing to their stability.

However, potential investors should also consider factors such as the company’s financial health, dividend sustainability, and the broader energy market conditions before making investment decisions.

How To Buy Energy Stocks In Canada

The cheapest way to buy stocks is from discount brokers. My top choices in Canada are:

Qtrade
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To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

Best Energy Stocks In Canada

Most of the best energy stocks in Canada, whether it’s conventional, renewable, or nuclear energy, can be healthy long-term holdings in your portfolio.

As a collective asset pool, they offer a great mix of technologies and commodities, including the ones the world is moving away from as well as moving towards.

If you are exclusively interested in oil as an energy commodity, here are some oil stocks and oil ETFs that you should look into.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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