ALERT: Why I’m Buying Energy Stocks in May
Back in March, I’d discussed the ongoing bull market for the oil and gas sector. Energy prices had already gained significant momentum in 2021. However, that kicked into high gear, as inflation rates soared in the first months of this year. The Russian invasion of Ukraine in February further destabilized the oil and gas space. Today, I want to discuss why it may be worth jumping back into energy stocks, even in the face of a highly volatile market.
Here’s why energy stocks just became more attractive
In the middle of April, I’d discussed whether it made sense for Canadian investors to take profits in top energy stocks. It has become increasingly difficult to project its trajectory in an uncertain market. On one hand, oil and gas prices could be bolstered by rising inflation and the ongoing geopolitical crisis in Europe. However, a weakening global economy and efforts to boost supply could also stomp out this bull market.
The case for the bull market strengthened after Europe proposed a ban on Russian oil imports. This was pushed forward in response to the ongoing war in Ukraine that has devolved into a humanitarian catastrophe. If Europe moves forward with this proposal, it will further limit global supply. I’m looking to take a chance on energy stocks that have been throttled in a choppy market to start the month of May.
You can trust these energy heavyweights for the long haul
Investors can expect to see Suncor’s first-quarter 2022 earnings on Monday, May 9. Suncor saw its earnings bounce back nicely in 2021 on the back of strong production and improved oil and gas prices. This energy stock currently possesses a favourable price-to-earnings (P/E) ratio of 17. It offers a quarterly dividend of $0.42 per share, which represents a 3.5% yield.
Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is a Canadian energy stock that recently rose above a $100 billion market cap. However, it has since treated to the high 90s. This energy stock is up 49% in the year-to-date period. Its shares are up 102% year over year.
The company unveiled its first-quarter 2022 earnings as markets opened on May 5. It reported net earnings of $3.1 billion, or $2.63 per diluted share in Q1 2022 — up from $1.38 billion, or $1.16 per diluted share, in the previous year. Canadian Natural Resources has also benefited from higher oil prices. Its shares possess an attractive P/E ratio of 12 at the time of this writing. Moreover, it last paid out a quarterly dividend of $0.75 per share. That represents a 3.6% yield.
One more energy stock I’d snag on the dip today
Imperial Oil (TSX:IMO)(NYSE:IMO) is the third and final energy stock I’d look to snatch up after this weekend. Shares of Imperial Oil are up 42% so far this year. It released its first-quarter 2022 results on April 29.
First-quarter net income increased $781 million year over year to $1.17 billion. Meanwhile, it delivered cash flow from operating activities of $1.91 billion, which was a three-decade high. Imperial Oil possesses a favourable P/E ratio of 19. It offers a quarterly dividend of $0.34 per share. This represents a 2% yield.
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* Returns as of 4/14/22
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Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends CDN NATURAL RES.
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