The stock market rally may slow down from here, as concern shifts to the U.S. debt ceiling. Undoubtedly, there’s always going to be something that causes investors to worry. Moving ahead, investors shouldn’t make too much of the near-term market movers. Instead, they should look to gain advantage from broader market volatility as it opens up a window of opportunity to purchase shares of firms at potential discounts.
In this piece, we’ll look at two energy stocks that are looking cheap as we move into mid-May. Indeed, energy stocks aren’t as hot as they were a year ago. Still, the recent cool-off may be a chance to obtain exposure to the sector at a more reasonable multiple.
Enbridge (TSX:ENB) and Suncor Energy (TSX:SU) are two of the most popular energy picks for Canadian investors. Both stocks have a sizeable dividend yield and solid long-term growth prospects. As shares of both firms swing wildly, investors may have a chance to capture more yield at lower prices.
Enbridge is the pipeline company with the towering dividend yield. At 6.69%, the yield is looking quite swollen again. Even if energy sector headwinds return in full force, investors can feel confident in the payout. Management has seen worse, and they’ve managed to keep the dividend standing, even as other energy firm slashed their payouts.
I think management’s shareholder friendliness is worth a premium. As the stock looks to recover from a rocky past year, I think investors should give the firm the benefit of the doubt. At the end of the day, the high-yielding heavyweights can be bountiful to hold if this market goes sideways for an extended period of time.
Suncor Energy stock has been range-bound for around a year now. Since peaking at $52 and change back in June 2022, the stock has been rollercoastering around $39 and $48 per share. At writing, the integrated energy firm is getting close to its 52-week lows.
With a new top boss and shift to trimming costs, Suncor Energy has indeed moved into a new era. Whether this era brings forth an improvement to the safety track record remains to be seen. Under the leadership of CEO Rich Kruger, I do think Suncor could live up to its full potential. It will take some time, though, as the oil sands behemoth has a lot of complexity going on behind the scenes. Still, Mr. Kruger’s goal is to shift gears to simplify things.
Recently, the company saw earnings retreat 34% year over year. That’s a steep decline, but the drop wasn’t as ugly as the headlines made it out to be. Suncor operated in a spectacular environment last year. And with a depressed single-digit price-to-earnings (P/E) multiple, the market had already braced for a steep drop. The best business climate may have changed, but that doesn’t mean Suncor can’t power higher with a new leader at the helm.
With a 5.19% dividend yield, Suncor is a very intriguing value option in the energy patch.
Better buy: SU or ENB stock?
I’d have to go with Suncor right here. I’m a believer in Mr. Kruger and think he’ll help drive meaningful change at the firm.