October 22, 2014

Canadian Dividend Stocks in Energy


 

 

The Canadian energy sector is dominated by oil and gas companies.  In fact, it is what the TSX is best known for on a worldwide scale.  More oil and gas companies are listed on the Toronto Stock Exchange than on any other stock exchange in the world.  Now you can see why our Canadian economy is so dependent on oil and commodity prices.  There is no question that we benefit greatly from our close geographical proximity to a huge oil consumer in the USA, and from the fact that our oil reserves are estimated to be 2nd in the world only to Saudi Arabia.  The oil and natural gas in Canada is substantially harder to bring to market than in the Middle-East, but we have it nonetheless.

 

Before we get into discussing just which oil and gas stocks to invest in, I should mention that we have seen some start up companies in renewable energy and sustainable energy, but they just aren’t attractive to most investors at the moment.  In a recent interview with the globe and mail Craig Porter (who is a Canadian energy sector specialist) had this to say about renewable energy market:

 

“We do look at a number of renewable energy stocks. Current economics don’t compete with traditional energy sources. The technology seems to take longer to develop, reducing capital costs, than the management teams of these companies typically estimate. We are constantly monitoring government policy with respect to renewable energy. The global economic crisis has put renewable energy projects/government initiatives to the back burner.”

 

So when you talk about investing in the Canadian energy sector, what you’re really speaking of are the major oil and gas companies that dominate the Canadian energy landscape.  Some people will lump utility and petroleum transport giants such as Enbridge and Fortis in with energy, but for the purposes of this overview lets just stick to looking at the fundamental energy options in the Canadian stock market.

 

Investors looking for huge dividend yields and immediate income on their investments would likely be better served in the utility, telecommunications, and especially financial sectors of the Canadian stock market.  Many people who were looking to get immediate income from the oil and gas sector were invested in income trusts, but that industry is in a state of flux thanks to the new regulations that were brought in this year.

 

If you are looking to pick specific stocks from the sector, some industry favorites are Encana (ECA), Suncor Energy Inc. (SU), Canadian Natural Resources Ltd (CNQ), Imperial Oil Ltd (IMO), Talisman Energy Inc (TLM), Nexen Inc (NXY), and Husky Energy Inc. (HUSKF.PK).  We will try to cover all of them and separate them by sub-sector.

 

A more attractive option for most Canadians was the former Canada Oil Sands Trust.  It has since been converted into a corporation and still maintains its spot atop most analysts charts if you want exposure to the huge Canadian energy sector.  Finally, there are a variety of ETFs on the market that track the energy market pretty efficiently as well.  I prefer the iShares CDN Energy Sector Index Fund (XEG) or the The Claymore Oil Sands Sector ETF (TSX:CLO).  Both will allow you to benefit from the world’s thirst for Canadian oil without picking a specific company.

 

Sub-sectors covered so far:

 

Pipelines:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
VSNVeresen Inc13.77.3182.040.961.020.00
PPLPembina Pipeline Corp23.46.67143.330.427.630.00
IPL-UInter Pipeline Fund16.395.8699.080.733.946.94
ALAAltaGas Ltd25.165.2555.680.51-5.13-32.41
TRPTransCanada Corp41.244.0790.380.835.585.19
PNGPacific Northern Gas Ltd30.13.9960.850.8839.06311.88
ENBEnbridge Inc60.543.2467.290.7010.4715.09

Enbridge ENB

Alta Gas ALA

Inter Pipeline Fund IPL-U

Pacific Northern Gas PNG

Pembina Pipeline Corp PPL

Transcanada TRP

Veresen VSN

 

Other Oil & Gas integrated stocks:

ARC Resources Ltd (ARX)

Baytex Energy Corp (BTE)

Bonavista Energy Corp (BNP)

Bonterra Energy Corp (BNE)

Canadian Oil Sands Ltd (COS)

Cenovus Energy Inc (CVE)

Crescent Point Energy Corp (CPG)

Husky Energy Inc (HSE)

Longview Oil Corp (LNV)

Pengrowth Energy Corp (PGF)

 

 

 

 

 

 

Penn West Petroleum Ltd (PWT)

PetroBakken Energy Ltd (PBN)

Peyto Exploration & Development Corp (PEY)

Progress Energy Resources Corp (PRQ)

Provident Energy Ltd (PVE)

Trilogy Energy Corp (TET)

 

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