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Investing in energy stocks
Under the right conditions, energy stocks can yield good dividends but they can be at the mercy of political and environmental factors. Here are our 10 energy stock picks.
Sector-specific investing can help you broaden and diversify your portfolio. But each sector comes with a unique assortment of benefits and risks.
What are energy stocks?
Energy stocks fit into the energy sector of the stock market—one of 11 sectors defined by the Global Industry Classification Standard (GICS). Companies in the energy sector focus on the location, mining and production of oil, coal and natural gas.
What subcategories are included in this sector?
Companies that fall within the energy sector can be sorted into the following subcategories:
- Oil and gas. At the start of the supply chain, we find companies responsible for drilling and producing oil and natural gas.
- Pipelines. These mid-stream providers transport oil and natural gas from the drilling site to their respective refineries.
- Mining. Mining companies produce coal that helps fuel power plants.
- Renewable energy. Those that produce wind and solar energy are considered renewable energy providers.
- Chemicals. This subcategory is comprised of companies responsible for refining oil and gas into specialty chemicals.
Investing in energy stocks
Enbridge Inc. (TSX: ENB, NYSE: ENB)
Enbridge Inc. is an energy infrastructure company that operates through 5 segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation and Energy Services.
- Market cap: C$93.623 billion
- YTD performance: 17.93%
- 1 Year performance: 24.67%
- 5 Year performance: 94%
- P/E Ratio: 20.24
- Headquarters: Canada
Suncor Energy Inc. (TSX: SU, NYSE: SU)
Suncor Energy Inc. is an integrated energy company that explores for, develops, produces, transports, refines and markets crude oil in Canada and internationally. It also operates wind farms in Ontario and Western Canada.
- Market cap: C$60.936 billion
- YTD performance: 34.50%
- 1 Year performance: 61.01%
- 5 Year performance: 199%
- P/E Ratio: 15.38
- Headquarters: Canada
TC Energy Corporation (TSX: TRP, NYSE: TRP)
TC Energy Corporation is a North American energy infrastructure company that operates through 5 segments: Canadian Natural Gas Pipelines; U.S. Natural Gas Pipelines; Mexico Natural Gas Pipelines; Liquids Pipelines and Power and Storage.
- Market cap: C$71.088 billion
- YTD performance: 23.15%
- 1 Year performance: 20.57%
- 5 Year performance: 77%
- P/E Ratio: 38.95
- Headquarters: Canada
Exxon Mobil Corporation (NYSE: XOM)
Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States and internationally. It operates through Upstream, Downstream and Chemical segments.
- Market cap: C$371.141 billion
- YTD performance: 43.54%
- 1 Year performance: 54.14%
- 5 Year performance: 116%
- P/E Ratio: 16.30
- Headquarters: United States
Parkland Corporation (TSX: PKI, OTC Markets: PKIUF)
Parkland Corporation operates food stores, convenience stores and gas stations in Canada, the United States, the Caribbean region and Central and South America. It operates under multiple brands including Ultramar, Esso, Fas Gas Plus, Chevron, Pioneer, Bluewave Energy, Pipeline Commercial, Columbia Fuels and Sparlings Propane.
- Market cap: C$5.658 billion
- YTD performance: 5.55%
- 1 Year performance: -6.97%
- 5 Year performance: 170%
- P/E Ratio: 57.34
- Headquarters: Canada
Canadian Natural Resources Limited (TSX: CNQ, NYSE: CNQ)
Canadian Natural Resources Limited acquires, explores for, develops, produces, markets and sells crude oil, natural gas and natural gas liquids (NGLs). The company offers synthetic crude oil (SCO), light and medium crude oil, bitumen (thermal oil), primary heavy crude oil and Pelican Lake heavy crude oil.
- Market cap: C$96.491 billion
- YTD performance: 55.29%
- 1 Year performance: 113.48%
- 5 Year performance: 222%
- P/E Ratio: 12.85
- Headquarters: Canada
Imperial Oil Limited (TSX: IMO)
Imperial Oil Limited explores for, produced and sells crude oil and natural gas in Canada. The company operates through 3 segments: Upstream, Downstream and Chemical segments.
- Market cap: C$42.905 billion
- YTD performance: 40.27%
- 1 Year performance: 99.66%
- 5 Year performance: 210%
- P/E Ratio: 18.39
- Headquarters: Canada
Pembina Pipeline Corporation (TSX: PPL, NYSE: PBA)
Pembina Pipeline Corporation provides transportation and midstream services for the energy industry. It operates through 3 segments: Pipelines, Facilities and Marketing & New Ventures.
- Market cap: C$27.568 billion
- YTD performance: 30.54%
- 1 Year performance: 34.65%
- 5 Year performance: 173%
- P/E Ratio: 25.17
- Headquarters: Canada
Cenovus Energy Inc. (TSX: CVE, NYSE: CVE)
Cenovus Energy Inc. develops, produces and markets crude oil, natural gas liquids and natural gas in Canada, the United States and the Asia Pacific region.
- Market cap: C$43.996 billion
- YTD performance: 42.17%
- 1 Year performance: 117.24%
- 5 Year performance: 362%
- P/E Ratio: 81.67
- Headquarters: Canada
Gibson Energy Inc. (TSX: GEI)
Gibson Energy Inc. is a liquids infrastructure company that gathers, stores, optimizes, processes and marketing of liquids and refined products in North America. It operates through 2 segments: Infrastructure and Marketing.
- Market cap: C$3.683 billion
- YTD performance: 12.04%
- 1 Year performance: 17.16%
- 5 Year performance: 145%
- P/E Ratio: 25.90
- Headquarters: Canada
What ETFs track the energy sector?
Individual stocks are highly liquid. But if you want exposure to a broader range of energy stocks, consider investing in exchange traded funds (ETFs). ETFs hold stocks in many companies and are therefore more diversified and less risky than buying a few individual stocks. That being said, ETFs typically pay lower dividends and may come with higher fees.
Look for ETFs that track the energy sector like the ones below:
| Stock | Code | Exchange | |
|---|---|---|---|
| iShares S&P/TSX Capped Energy Index ETF | XEG | TSX | Buy XEG on CIBC Investor's Edge |
| Horizons S&P/TSX Capped Energy Index ETF | HXE | TSX | Buy HXE on CIBC Investor's Edge |
| BMO Equal Weight Oil & Gas Index ETF | ZEO | TSX | Buy ZEO on CIBC Investor's Edge |
| iShares Global Clean Energy ETF | ICLN | Nasdaq Global Market | Buy ICLN on CIBC Investor's Edge |
| BMO Clean Energy Index ETF | ZCLN | TSX | Buy ZCLN on CIBC Investor's Edge |
| Energy Select Sector SPDR Fund | XLE | NYSEArca | Buy XLE on CIBC Investor's Edge |
| Vanguard Energy Index Fund | VDE | NYSEArca | Buy VDE on CIBC Investor's Edge |
| iShares Global Energy ETF | IXC | NYSEArca | Buy IXC on CIBC Investor's Edge |
| iShares U.S. Energy ETF | IYE | NYSEArca | Buy IYE on CIBC Investor's Edge |
| Alerian MLP ETF | AMLP | NYSEArca | Buy AMLP on CIBC Investor's Edge |
Compare online trading platforms to buy energy stocks and ETFs
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Why invest in energy stocks?
The energy market is massive, and for good reason—this resource has been in high demand globally for many years. Even taking into account the shift towards clean energy, the world is still decades away from being free from oil, coal and gas.
The energy sector’s profitability is largely tied to the price of crude oil, but stock prices are typically stable and often pay dividends. Income from energy stocks may also be tax-sheltered—an attractive incentive for investors.
How to invest in oil in Canada
What unique risks does the energy sector face?
Politics play a sizable role in the energy sector’s performance. If companies explore for energy resources in unstable territories, projects are at risk of being sidelined or halted in the face of political turmoil.
Incorrect geological reports, oil spills and accidents can be costly for investors. This sector isn’t without its risks, and investors should weigh the benefits against the drawbacks before putting up their funds.
Bottom line on energy stocks
Investing in the energy sector can yield profits, but you need to be aware of how energy stocks can be affected by factors such as political turmoil, changing energy technology and environmental initiatives. Carefully compare stock trading platforms to find the best energy investments for your individual preferences and investment goals.
Frequently asked questions
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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