Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
Canadian oil stocks have created significant wealth for shareholders over the past two decades. Take Suncor Energy (TSX:SU), one of the largest oil and gas companies for example, the stock has generated a total return of 441 per cent for investors after adjusting for dividends, outperforming the broader TSX market.
Suncor ended the first quarter of 2024 with adjusted funds from operations of $2.46 per share and adjusted operating earnings of $1.8 billion or $1.41 per share. The energy giant returned $1 billion to shareholders, including $700 million in dividends. Analysts expect it to post adjusted earnings per share of $5.51 in 2024, up from $5.10 per share in 2023. As such, at the current forward P/E of 9.6 times, Suncor Energy’s shares are still fairly cheap, a slight discount to the consensus target share price expected by analysts on Bay Street.
However, if you’re looking for an energy stock on the TSX that can deliver returns over the long term, Canadian Natural Resources (TSX:CNQ) should be a better choice.
In fact, since May 2004, Canadian Natural Resources stock has returned a whopping 1790% to shareholders after accounting for reinvested dividends. This energy stock currently yields 3.8% in dividends, and Suncor Energy is 4%.
For the first quarter of 2024, Canadian Natural Resources reported adjusted funds flow of $3.1 billion and net income of $1.5 billion. The company has distributed $1.1 billion in dividends to shareholders and repurchased $600 million in shares, giving it a payout ratio of less than 50 per cent. The lower dividend payout ratio has allowed it to reduce debt on its balance sheet, invest in accretive acquisitions, and allocate capital to organic growth projects. With net debt of $10bn as of 2023, the company now aims to distribute 100 per cent of its free cash flow to shareholders in 2024.
Financially, the energy giant ended the first quarter with a debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) ratio of 0.6x, with $6.8 billion in reserves at the end of the first quarter.
It’s worth pointing out that despite the stock’s huge gains, the forward P/E ratio also remains at just 14x, as analysts expect its earnings to improve from $7.47 per share in 2024 to $9.18 per share in 2025, which will help to support its stock to continue to rise over the next 12 months.
