Oil stocks represent a large percentage of the Canadian stock market and the options can be overwhelming at times. When looking at a particular investment, it’s always important to look at its peers rather than focusing on just one company. Often times, many of the stocks can fit your portfolio, it just happens that when you are ready to buy, one may be preferable over the others.
I looked at a number of oil companies in the past but I think it’s time we put them together and seriously compared them. For the purpose of identifying a Canadian oil giant, the market cap has to be above $25B otherwise a number of up and comers start to show up. This filter results in the following companies:
- Suncor Energy Inc. TSE:SUNYSE:SU – Market Capitalization of $65.39B
- Canadian Natural Resources Limited TSE:CNQNYSE:CNQ – Market Capitalization of $51.75B
- Imperial Oil Limited TSE:IMONYSE:IMO – Market Capitalization of $49.04B
- Husky Energy Inc. TSE:HSE – Market Capitalization of $32.56B
- Cenovus Energy Inc. TSE:CVENYSE:CVE – Market Capitalization of $26.25B
Canadian Oil Stocks
Let’s do a summary comparison kick-start the review. There is nothing better than numbers :) Since I particularly like dividend growers, I am also including the 5 and 10-year dividend growth average. Three of the big five are Canadian dividend aristocrats and Canadian Blue Chip Stocks with SU, CNQ and IMO. Note that the data is accurate as of the time of writing.
|5 Year Dividend Growth Average||30.80%||9.17%||4.94%||0.00%||7.38%|
|10 Year Dividend Growth Average||25.77%||17.63%||5.50%||14.35%||–|
As it turns out, the big oil companies compare each other. The charts below are from Imperial Oil trying to highlight how they compare. As you know, analysts also compare them. I like to use StockChase to review what analysts have to say about companies.
Related: How To Use Stock Chase
There is an interesting ownership/partnership around one of the largest oil producer referred to as Syncrude. This joint venture doesn’t trade on the stock market but the big oil giants each have a stake in the company itself.
Suncor Energy Inc.
Suncor is the biggest oil producer of Canada and recent addition to Warren Buffett’s portfolio. Suncor is drilling in Canada’s largest oil sands reserve and has operations in the US and UK. Its production appears to have more growth all the way through 2019 for more growth and more cash to return to investors. Suncor’s gas stations are branded as Petro-Canada.
As it happens, Suncor is shareholder friendly. The combination of share repurchase and dividend increases has rewarded the shareholders. The dividend growth as you have seen above is quite spectacular.
Canadian Natural Resources Limited
Canadian Natural Resources Limited was founded in 1973 and is headquartered in Calgary, Canada.The company has operations in Western Canada, the United Kingdom, Côte d’Ivoire, Gabon, and South Africa. CNQ does not have any gas stations of its own but does have some retail.
CNQ is a recent dividend payer when you look at the big picture as it started paying dividends in 2001. With that said, their dividend growth has been remarkable with a 17.63% 10-year average. Since 1993, the company has split 4 times.
StockChase commentary from analysts is pretty positive on the company’s performance expectations for the coming 12-18 months.
Imperial Oil Limited
Imperial boasts a 19-year dividend increase streak. Six more years and it will meet the requirements to become a US Dividend Aristocrats. That would be quite an achievement. It would seem that Imperial has preferred to buy back shares rather than give higher dividends keeping their dividend yield low and their dividend growth in the 5%. The graph below doesn’t show much growth from share buyback, it’s disappointing from that perspective.
It’s worth noting that Exxon NYSE:XOM owns 69.6% of Imperial Oil. If you already own XOM, owning IMO might just be redundant. Esso is the brand of gas stations for Imperial Oil.
Husky Energy Inc.
Historically, Husky was originally founded in 1938 in the US. In 1946, it was moved to Alberta, Canada to take advantage of the expanding asphalt and oil production in the area. Filling stations include the Husky and Mohawk brands.
Husky has extensive conventional oil and natural gas assets. Their growth is focused on the Asia Pacific region, oil sands, and the Atlantic region. According to their investor presentation, they have a heavy oil core holdings to continue generating cash flow for many years, their growth comes through their potential expansion and new findings. However, they have a strong pipeline for distribution across Canada and the US.
Husky Energy is in the doghouse for dividend growth. No dividend increases over the past 5 years and a roller coaster of dividend payout prior to 2008.
Cenovus Energy Inc
Cenovus is a spin-off from Encana and that’s why historical data on the company is limited. The company was formed in 2009 as an integrated oil company and Encana was left to focus on natural gas and other assets.
Cenovus is heavily focused on the oil sands area for its growth and conservative oil for near-term cash flow. The oil sands have definitely shown growth in production since 2009 according to their investor publication.
CVE has had some good dividend increases in the past few years. Let’s hope it can continue and establish consistency for investors.
It doesn’t appear that any single chart is putting one company above the other. While 2011 offered a peak for many, we are just reaching the same valuation again. Trying to guess if their new explorations will lead to massive growth many years later also appears to be a losing game in my opinion. So many hurdles from an infrastructure and governance have to be approved and it takes years. Safety could be found with Canadian Dividend Achievers as the list contains some of the safest Canadian dividend stocks.
In the end, solid management, revenue growth, cost containment and dividend growth will be looked at on my end.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.
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