Yahoo Finance 3 Canadian Energy Stocks to Buy Now for Long-Term Dividends
Never mind the usual large-cap utilities companies: the following three Canadian energy stocks offer a better mix of value, future growth, and passive income. Let’s take a look at the stats for three of the best oil and gas stocks on the TSX index for a long-term dividend investor.
Husky Energy (TSX:HSE)
Just right for an RRSP or TFSA, this sometimes overlooked TSX index energy stock was up 1.68% at the time of writing and saw a one-year past earnings-growth rate of 89.1%. While Husky Energy underperformed the Canadian energy industry over the past year and made a ROE of just 7% for the same period, more shares have been bought than sold by Husky Energy insiders in the last three months, and in fairly high volumes.
Its five-year average track record could be better, though with a past earnings growth of 4.4%, at least it’s in the black. A debt level of 31.7% of net worth shows an adequate balance sheet, meanwhile, and a range of stats delineate what is essentially an undersold stock, from a 41% discount off its future cash flow value to a P/E of 10.2 times earnings and P/B of 0.8 times book. Growth investors may be turned off by a projected drop of 7.4% in annual earnings, though a dividend yield of 3.45% may tempt in equal measure.
Parkland Fuel (TSX:PKI)
With one-year returns of 36.4% that beat the energy industry average, solid one-year past earnings growth of 151.2%, and a five-year average past earnings-growth rate of 20.9%, Parkland Fuel is an outperforming stock that deserves your attention.
As with any stock worth having, the stats are a bit mixed for Parkland Fuel. Value could be better, with a P/E of 25.5 times earnings and P/B of 2.9 times book showing overvaluation, while a past-year ROE of 11% is below the significant 20% level. Parkland Fuel’s level of debt compared to net worth has increased over the past five years from 82.7% to the current 125.7%.
So, why buy? A 42% discount off the future cash flow value suggests that more upside is on the way, which is backed up by an 18.3% expected annual growth in earnings. Passive-income investors, including those padding out a TFSA or looking to grow a nest egg such as an RRSP, should be interested in a dividend yield of 3.01%.
TransCanada (TSX:TRP)(NYSE:TRP)
Up 1.11% in the last five days at the time of writing, TransCanada is one of the most popular stock on the TSX. Its past-year returns of 13.3% beat the gas and oil sector for the same 12 months, while a one-year past earnings growth of 18.1% and five-year average of 15.7% show that TransCanada hasn’t been out of fashion for some time.
More shares have been bought than sold by TransCanada insiders in the past three months, but only by a narrow margin, with large volumes of shares have been both bought and sold recently. However, it remains an attractively valued stock, with a 42% discount and P/E of 16 times earnings.
The bottom line
TransCanada’s level of debt compared to net worth has increased over the past five years from 128% to 162.2% today and is not well covered by operating cash flow. However, if you can look past an inadequate balance sheet, this stock is a strong play on the energy section of the TSX index. Its dividend yield of 4.79% is sufficiently high to make it the winning stock on today’s list.
More reading
You Could Make $100K in 2 Years by Investing Now in Bombardier (TSX:BBD.B)
Attention Millennial Couples: How to Turn a $100,000 TFSA into $1 Million
This Instant 5-REIT Portfolio Will Generate $500/Month in Passive Income
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019
