2 Canadian Energy Stocks for Market-Beating Returns

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The broader Canadian stock market has not been doing well lately amid high inflation, interest rate hikes, and rising geopolitical tensions. The S&P/TSX Composite Index is down by 3.17% year to date at writing, reflecting the equity market’s state. However, it isn’t the entire stock market that is going through a major downturn.

The Canadian energy industry has benefited greatly from the geopolitical tensions and rising commodity prices. The S&P/TSX Capped Energy Index represents a market capitalization-weighted collection of the top Canadian energy stocks. The index is up by a massive 66.27% year to date.

It is a very good time to own energy stocks on the TSX. Today, I will discuss two Canadian energy stocks you could consider adding to your portfolio to leverage the high energy demand and enjoy potentially stellar profits in the coming weeks.

ARC Resources

ARC Resources (TSX:ARX) is a $14.63 billion market capitalization Canadian energy company headquartered in Calgary. The independent energy company is engaged in the acquisition, exploration, development, and production of oil and natural gas through conventional methods in Western Canada.

It is Canada’s third-largest natural gas producer and managed to generate substantial cash flows, thanks to the tailwinds propelling the energy industry.

ARC Resources stock trades for $21.47 per share at writing, and it boasts a 2.24% dividend yield. Its share prices are up by almost 80% year to date, and it looks well positioned to soar further in the coming months. It could be an excellent addition to your portfolio at current levels.

Cenovus Energy

Cenovus Energy (TSX:CVE)(NYSE:CVE) is a $60.54 billion market capitalization Canadian integrated oil and natural gas company. Headquartered in Calgary, it might not be the largest integrated energy player in Canada. But that factor could be the very reason it is an attractive asset to consider.

The stock does not offer much in terms of shareholder dividends. However, its management has been using as much of its cash flow as possible to pay down its debt and improve its fundamentals. It has already increased its base dividends by 300%, and more dividend hikes could follow.

Cenovus Energy stock trades for $30.70 per share at writing, and it boasts a 1.37% dividend yield. Its share prices are up by an astonishing 88% year to date, and it does not look like its upward momentum will slow down anytime soon. It could be a steal for your portfolio, even after such stellar gains so far this year.

Foolish takeaway

Canadian investors have plenty of reasons to be bullish on energy stocks. The embargoes imposed against Russia due to its war with Ukraine have disrupted global oil and natural gas supplies, leading to substantial uncertainty worldwide. Many of the largest oil and gas producers cannot increase production to meet demand due to environmental concerns.

The demand for energy products will likely keep increasing in the coming weeks and months because the world is moving into a post-pandemic era. High energy demand will require more producers to step up, and that could result in more profitability for smaller energy players.

ARC Resources stock and Cenovus Energy stock are not the biggest players in the Canadian energy industry. It could be the very reason these two companies could be attractive additions to investor portfolios at current levels.

The post 2 Canadian Energy Stocks for Market-Beating Returns appeared first on The Motley Fool Canada.

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* Returns as of 4/14/22

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More reading

Oil vs. Gold: Which Is Better for High Inflation?
3 TSX Energy Stocks With Outstanding Dividend Growth
This 1 Oil Stock Is a Top Buy Ahead of Stagflation
2 Energy Stocks to Buy as Oil Prices Remain in Overdrive
Gas Prices: Why You’ll Have to Wait for Relief

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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