Written by Adam Othman at The Motley Fool Canada
The last 12 months haven’t been great for the energy index. Between Nov. 2022 and June 2023, the index experienced a staggered fall, and even though the sector went bullish from July 2023, the phase didn’t last long. The index fluctuated in September 2023, and now, it looks ready for a bearish phase. This notion is endorsed by the decline in oil futures.
But that doesn’t mean there aren’t any viable choices if you wish to invest in the energy sector right now, even with the uncertainty. There are two picks for Nov 2023 that might serve you well in the long term.
A pipeline giant
Enbridge (TSX:ENB) is one of the favourite picks of most Canadian dividend investors at any given time of the year. But it’s looking especially attractive now, because of the 21% discount it’s trading at.
The discount has pushed up its dividend yield to 7.7%, making it one of the most generous dividend aristocrats and blue-chip stocks in Canada right now. Locking in this yield is reason enough to buy Enbridge this month.
The characteristic strengths of Enbridge are still relevant. The pipeline-based business model may help it survive the oil price fluctuations better than most upstream and downstream businesses as well as the negative sentiment around slipping oil futures. The company has also grown its natural gas business substantially through the $14 billion deal, improving its product/service portfolio mix.
The company has a solid history of dividend growth. However, it’s planning on a more conservative approach to raising dividends, which is a smart move from a long-term dividend sustainability perspective.
All of these factors, combined with its stellar dividend history, make Enbridge a perfect choice in this uncertain energy market since it offers a high degree of certainty when it comes to dividend-based returns.
An undervalued energy company
With a price-to-earnings ratio of just 3.9 and other valuation metrics on equally attractive levels, Parex Resources (TSX:PXT) is currently among the best value picks in the energy sector. However, that’s not the only reason to consider investing in this stock right now.
It’s also one of the few Canadian energy companies that operate primarily in another country, Colombia, where it’s one of the largest independent energy producers.
This strength is invaluable when you have to buy an energy stock when the Canadian energy sector is in trouble and allows the company to recover relatively swiftly after the 2014 crash. But its leadership status in the Colombian energy sector, despite being a small, mid-cap company, might allow it to handle the global slump in oil demand better than its heavier counterparts.
The low valuation and strong finances also give the stock more leeway in a weak market. With a 5.3% yield, it’s also a good pick from a dividend perspective.
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The two energy stocks can be counted among the best picks from the sector for Nov. 2023. For Enbridge, the desirability is augmented by the discount it’s trading at. Parex is attractive for its long-term growth potential, solid dividends, and undervaluation.
The post My 2 Favourite TSX Energy Stocks for November 2023 appeared first on The Motley Fool Canada.
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