6 Best Energy Stocks Canada Reviews 2024 | The Factors That Investors Should Consider

January 22, 2024 | Editorial Team

Energy stocks, or rather oil stocks, constitute a significant part of the Canadian stock market.

The energy stock is changing in response to the change in the energy industry. Hence, a portfolio that worked some years back may no longer work. There are several diverse companies with energy stocks. Finding the best one to invest in may be challenging. Thus, you may need financial advice from an expert, online broker or robo advisor.

What are your expectations? Is your focus on revenue growth or yield? These are the fundamental factors you should consider before selecting an energy stock to invest in. Will electric cars affect the growth rate of energy stocks? Stay tuned.

Several energy stocks may work for your portfolio. We’ve compiled a list of the best energy stocks Canada. But, depending on your goals and preference, you can choose any of them (see top stocks to buy now).

symbols of oil stocks and percentage on the mobile screen

What Are Energy Stocks Canada?

Energy stocks Canada are the shares in companies producing or selling energy. This can be oil, gas, or related products. 

Oil and gas have dominated the energy stocks for an extended period. Energy companies can, at times, be traded publicly (see also day trading for beginners and day trading Canada).

Canada’s energy stocks include oil companies, electricity companies, natural gas corporations, solar farms, and renewable energy organizations. In addition to this list, this earlier post contains some other top Canadian stocks for long-term dividend yields.

Categories of Energy Stocks Canada

The energy stock is divided into three categories. These are the upstream, midstream, and downstream. However, player overlaps have caused this distinction to distort. The upstream category deals with the underground exploitation of oil and natural gas; the midstream group specializes in the transportation and storage of oil and gas. Refining and processing of the oil and gas are left for the downstream sector.

The overlapping of players in this stock sector has resulted in the following classification of the energy sector.

Oil & Gas – Midstream Industry

The midstream group transports and stores gas and oil. They include:

  • Pembina pipeline – Market cap $22.53 billion and a price-to-earnings ratio of 0.00
  • Gibson energy – Market cap $3.65 billion and a price-to-earnings ratio of 39.05
  • Enbridge – Market cap $105.02 billion and a price-to-earnings ratio of 17.31
  • Inter Pipeline – Market cap $8.1 billion. Its price-to-earnings ratio is 16.82

Oil & Gas – Integrated Industry

This stock sector blends upstream and downstream energy sectors. The companies involve the exploitation, refining, and processing of oil and gas.

They include:

  • Imperial oil – Market cap $29.52 billion and a price-to-earnings ratio of 0.00
  • Cenovus energy – Market cap $29.86 billion and a price-to-earnings ratio of 0.00
  • Suncor – Market cap $48.32 billion and a price-to-earnings ratio of 32.58

Oil & Gas – Exploration and Production Industry

These are companies dealing in the exploration and production of oil and gas. 

They include:

  • Arc Resources – Market cap $8.61 billion and a price-to-earnings ratio of 23.37
  • Canadian Natural Resources – Market cap $62.32 billion and a price-to-earnings ratio of 15.28
  • Freehold Royalties – Market cap $1.78 billion and a price-to-earnings ratio of 83.11

How to Choose the Best Canadian Energy Stocks

Consider the factors listed below before settling on an energy stock.

Determine the Company’s Potential and Future Forecast

Climatic change and various other factors may impact energy sectors in different ways. Companies are putting different strategies to adapt to the change. You should ask yourself how well the company has positioned itself in addressing future changes and uncertainties. The ideal company has a good plan in addressing potential future issues without compromising its investors’ capital investment. These stocks, however, could be more volatile (see swing trading) than the majority of large stocks. 

Analyze the Energy Company’s Financial Standings

The prices of Energy sector products tend to fluctuate quickly (look into fundamental and technical analysis). The energy company with the potential to withstand recession is the ideal company to invest in. The company should also have a strong balance sheet and competitive dividend payout ratio. The company should also have stable revenues and minimum price fluctuations.

What Are the Best Canadian Energy Stocks?

1. Canadian Natural Resources (TSE: CNQ)

This company is an oil and gas company dealing in the exploration and production industry. Its portfolio includes crude oil, oil sands, and natural gas.

The company explores and produces oil and gas in North America and Africa. This company also has midstream assets. These assets have two crude oil pipelines and generation plants. This transports heavy crude oil to the international markets.

The Canadian natural resources have a market capitalization of $62.32 billion. Its price-to-earnings ratio is 15.28. The company usually pays dividends at a rate of 3.57% dividend. Finally, it has a payout ratio of 51.90%. And an opportunity score of 67.

2. Brookfield Renewable Partners Stock (BEP: UN)

This company is a Canadian energy sector dealing in renewable energy assets. Its portfolio consists of 5,318 power plants. 

These power facilities can produce 19,400 MW of power. The company diversifies its operations into four continents. 

The total worth of the assets sums to around US$52 billion. 

Brookfield has excellent growth potential. But has a lower yield. It has a compound annual growth rate of 22.73%. The stock’s balance sheet is also strong. Not to mention the steadily growing revenue.

The good thing about this stock is its ability to grow revenues and dividends simultaneously. However, your dividends may go low if the revenue recesses.

The market capitalization of this stock is $23.8 billion. Its dividend yield is 2.9%.

3. Enbridge (TSE: ENB)

Enbridge is a Canada-based oil and gas midstream industry. It transports and stores oil and gas. The company majorly operates in Quebec, New York, and Ontario.

Enbridge’s portfolio consists of 192,000 miles of natural gas in Mexico and North America. It also has 17,000 miles of crude oil.

The company has a processing capacity of 3.1 Bcf/d. It also has natural gas storage of 438 Bcf. The market capitalization of the stock is $105.02 billion. The Price-to-earnings ratio of Enbridge is 17.31. And it has a dividend yield of 6.44%.

The company’s payout ratio is 110.00%. Finally, the opportunity score of this stock is 66.

4. Keyera Corp. (TSE: KEY)

This company is an oil and gas midstream industry. It transports and stores natural gas liquids.

Keyera’s primary areas of operation are located to the west of Canada. This is a strategic location where production takes place. Keyera also deals in natural gas, including butane, propane, and octane.

The market capitalization of this stock is $7.01 billion. Its price-to-earnings ratio is 56.96. The dividend yield is 6.055. And the payout ratio is 344.80%. 

Finally, the stock has an opportunity score of 50.

5. Suncor (TSE: SU)

This company stock is an oil and gas integrated industry. It extracts, upgrades, refines and markets its energy products. The company also produces and markets oil sands and refines petroleum. It is among the most outstanding independent energy companies in the global market.

This company has a more diverse stock. Its portfolio also consists of renewable energy trading. In addition, it has offshore energy assets in the U.K., Canada, Norway, and the North Sea.

The four refineries, wind farm, and ethanol plant make Suncor the real deal. The company’s oil production capacity is 940 mb/d oil production. 

The refining capacity is 460 mb/d. It also has an upgrading capacity of 550mb/d.

Suncor has a market capitalization of $48.32 billion. It also has a price-to-earnings ratio of 32.58. Its payout ratio is 84.50%. And the dividend yield of the stock is 2.58%. Finally, the opportunity score for Suncor is 26.

6. Algonquin Power Stock (TSX: AQN)

Algonquin is a Canada-based renewable energy stock. It trades in the Toronto Stock Exchange. 

The stock has steady dividends. Its dividends have grown at a fast rate (61%) in the past five years.

This stock is an ideal long-term investment. Its compound annual growth rate over the next ten years is 21.28%. This may be the best time to invest in this stock. The stock is still picking up after the pandemic effect. Therefore, a current investment will appreciate greater yields in the near future.

Algonquin power stocks operate as two different entities. These are Liberty Utilities and Liberty power. 

Liberty Utilities distributes electricity and water. It also distributes gas. Besides, it treats wastewater. Liberty power stakes in clean energy production plants. These include solar, wind, and hydroelectric.  

The asset worth of Algonquin power stocks is $11 billion. There are 369,000 gas and 267,000 electrical connections. 

The dividend yield of the stock is 3.88%. The company has a market capitalization of $12.25 billion.

The Bottom Line

With oil and gas dominating the energy sector, there are high chances to invest in oil and gas stocks. Both the downstream, midstream and upstream energy industries provide viable options for investments. With the emergent of integrated industries that blends different classes of the energy sector, investments have become more diversified. This also improves the security of your investment if one sector recesses.

Ensure you do thorough research before choosing an energy stock. Consider your goals to arrive at the best option. Be vigilant of recessions and stock assets valuation. Your capital investment might depreciate to yield low returns. 

It’s wise to buy these stocks at their low times. This allows you to buy at discounted prices. Thus, earning a better return on your investment.