Oil prices crossed the US$130 per barrel mark last month amid supply concerns arising from the sanctions placed on Russia after its invasion of Ukraine and rising demand. However, due to the COVID-related lockdown in China and coordinated releases from oil reserves, oil prices have cooled down this month to trade around US$100/barrel. With oil trading at this price, here are three top energy stocks that you can buy right now.
Suncor Energy (TSX:SU) Supported by higher oil prices and its solid fourth-quarter performance, Suncor Energy (TSX:SU)(NYSE:SU) has returned over 32% this year, outperforming the broader equity markets. Given its low-decline, long-life asset portfolio, the company could cover its operating expenses, sustainable capital investment, and pay dividends, provided WTI oil trades at US$35/barrel. So, with oil prices trading significantly higher, the company could enjoy higher margins in the coming quarters.
Further, Suncor Energy has committed to a capital investment plan of around $4.7 billion to enhance its integrated asset base value. The company is also increasing its production by 5% compared to the previous year. Meanwhile, the company has also reduced its debt by $3.7 billion, lowering its interest expenses. It also trades at an attractive NTM (next 12 months) price-to-earnings multiple of 6.3 and pays quarterly dividends with a forward yield of 4.06%. Considering these factors, I expect Suncor Energy to deliver superior returns over two years.
Enbridge Enbridge (TSX:TSX:ENB)(NYSE:ENB) is a midstream energy company that operates over 40 revenue-generating assets. The rising energy demand could increase its asset utilization rate. Additionally, the company put $10 billion of projects into service last year and expects to invest $5-$6 billion each year for the next three years. These investments could expand its midstream and renewable energy asset base. So, Enbridge’s outlook looks healthy.
Further, Enbridge is a dividend aristocrat and has raised its dividends without interruption for the last 27 years at a compound annual growth rate of 10%. Currently, its forward yield stands at a healthy 5.73%. Given its resilient cash flows and healthy growth prospects, I believe Enbridge’s dividends are safe. Meanwhile, the company trades close to 20% higher for this year. Despite the surge, its forward price-to-earnings multiple stands at 18.9. So, I believe the uptrend in Enbridge can continue.
TransAlta Renewables Russia was the largest exporter of oil and natural gas to Europe in 2021, supplying 40% of its needs. Meanwhile, the European Union is focusing on reducing its dependence on Russia amid its aggression toward Ukraine. So, the European Union has a charted out a 10-point plan, which includes strengthening its wind and solar projects. The increase in oil prices could also accelerate the transition toward clean energy.
Given the favourable market conditions, I have selected TransAlta Renewables (TSX:RNW), which has an economic interest in 50 power-producing facilities, as my final pick. It sells the power produced from its facilities through long-term agreements, thus delivering stable and predictable cash flows. Additionally, the strategic acquisitions and robust developmental pipeline could boost its financials in the coming years.
Meanwhile, TransAlta Renewables has also rewarded its shareholders by consistently raising its dividends since going public in 2013. With a monthly dividend of $0.07833/share, its forward yield stands at 4.86%. The company currently trades at a discount of over 14% from its 52-week highs. So, I believe TransAlta Renewables would be an excellent buy at these levels.
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The Motley Fool recommends Enbridge. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.