3 Energy Stocks to Buy Hand Over Fist in July 2024

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In the near term, Canadian energy stocks can rapidly fluctuate. Energy prices can be unpredictable and volatile. Oil started the year at US$72 per barrel, shot up to $86, then dropped to US$73, and bounced back to the low $80 range where it sits today. That’s all within six months of the year.

Fortunately, Canadian energy stocks have reconstructed themselves to withstand volatility for the long term. Production growth is no longer the sector’s strategy. Rather, modest growth, cash flow maximization, and capital returns have become the focus.

Many Canadian energy companies are sitting with sustainable balance sheets and modest debt. They are starting to return cash to shareholders in the form of share buybacks, dividends, and special dividends. If you are looking for some quality energy stocks to buy in July, here are three to buy.

Pembina: Steady income

Pembina Pipeline (TSX:PPL) is not directly an energy stock. However, it plays a major role in the Canadian energy industry.

It provides collection and egress pipelines that are accompanied by processing/midstream facilities, storage, and export facilities. Pembina just announced a positive investment decision to proceed with an LNG (liquified natural gas) export facility in British Columbia.

The company is very well managed. It has had a steadily growing base of free cash flows in the past couple of years. As a result, its balance sheet is in a strong position to invest in growth initiatives.

Its attractive 5.5% dividend yield is well-covered by its contracted asset base. Recently, it has returned to a low single-digit dividend-growth posture.

If you want energy exposure, but with limited commodity risk, Pembina is a great energy stock. You get to collect a nice yield, and you could see a nice valuation up-rating if it can successfully develop its LNG project.

Tourmaline Oil: A solid energy stock

If you don’t mind energy volatility, then Tourmaline Oil (TSX:TOU) is an intriguing stock today. Despite what its name says, Tourmaline is the largest producer of natural gas in Canada. Natural gas prices are very volatile.

Fortunately, Tourmaline has built an incredibly resilient business. It owns most of its own natural gas processing infrastructure. As a result, it has a very low cost of production and transportation. With access to some of the highest-priced markets, it can earn strong excess cash flows, even when natural gas prices are low (like right now).

Tourmaline has a pristine balance sheet with almost no net debt. As a result, it can be incredibly flexible about how it rewards shareholders.

It yields 2% today. However, it has been pumping out special dividends to shareholders. Those are a bit smaller recently, but even a slight uptick in natural gas prices could result in more substantial special dividends.

Cenovus Energy stock: More returns coming

Cenovus Energy (TSX:CVE) is another attractive energy stock pick today. It has an integrated energy business that incorporates oil production and refining. It has excellent decades-long production assets.

Its refining business has been challenged in the past. However, it appears like it is turning around and starting to hit its stride with strong operating consistency and increasing utilization. With +$80-per-barrel oil, the company can generate pretty substantial cash flows.

It is nearing its balance sheet goal of $4 billion of net debt. Once it hits that target, it plans to return 100% of its excess cash to shareholders. It has a 2.7% dividend yield. The company has massively grown its base dividend and been known to pay the odd special dividend as well.