Three energy stocks that are already worth it

oil and natural gas

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news of slower than expected Electric vehicle (EV) adoption rates in 2023 might have spooked some EV investors a bit. However, the same could be a good sign of oil's resilience in the modern era. It is too early to predict the demise of Canadian oil sands reserves. Investors could see more capital gains and receive growing cash dividends from TSX energy stocks for much longer. What happens to oil prices in the long term remains an unknown, but three energy stocks are already worth a look.

Canadian natural resources (TSX:CNQ) shares, Parex Resources (TSX:PXT) shares, and Primary resources The stock (TSX:POU) could be the best buys right now. This is why.

Canadian natural resources

Canadian Natural Resources is one of the largest oil and gas explorers and a low-cost producer on the TSX. The $94.8 billion energy company could be a dividend growth stock that income-oriented investors could buy right now.

Management's commitment to allocate 100% of the company's free cash flow to shareholder returns once it reaches its conservative net debt target of $10 billion could become a reality in the first half of this year. anus. Once achieved, CNQ could significantly amplify its share buybacks and substantially increase dividends for stock investors, as oil prices continue to deliver.

Canadian Natural Resources stock's current quarterly dividend of $1 per share yields 4.5% annually. It is well covered by earnings and cash flow.

Most notably, the company once boasted of breaking even oil prices in the $30s per barrel in 2022. The top energy stock should do very well, amplify share buybacks and potentially increase dividends if the Oil prices remain near current levels of around $78 for longer. .

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Parex Resources

Parex Resources is a $2.2 billion Calgary-based oil producer that extracts oil from Colombia's rich resources and sells it at premium prices based on the Brent Crude benchmark. Due to perceived external risks, some of which could be irrational, PXT stock is one of the cheapest and highly undervalued energy stocks you can buy on the TSX today.

Energy stocks are very generous to their loyal investors. The company pays a quarterly dividend of $0.375 per share that yields 7% annually. The dividend appears to be well covered by earnings, given a payout ratio of 20%. Investors could add PXT stock to passive income portfolios by 2024.

Additionally, Parex Resources is experiencing production growth. It could potentially fund another dividend increase in 2024 or support a share buyback program.

Investors can buy PXT shares at an attractively low forward price-to-earnings (P/E) ratio of 4.1 times its projected 2024 earnings. P/E-growth ratio (PEG) of 0.8 suggests that the stock could be undervalued, considering Parex Resources' growth potential.

Primary resources

Paramount Resources is a prominent $4.2 billion oil and natural gas producer. The company is expanding the productivity of its assets in Alberta and British Columbia. Despite the normalization of oil and natural gas prices over the past year, Paramount Resources achieved record quarterly results in 2023, indicating potential for further success.

Over the past three years, the company has significantly reduced its debt and invested more in key assets. Management initiated a monthly dividend of $0.02 per share in 2021. Since then, the dividend has increased 525% to reach 12.5 cents per share each month.

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Why should you buy Paramount Resources shares now? This energy stock is one of the most financially stable options in the Canadian oil sands industry. By reducing its debt from $868 million in 2018 to around $26 million in September 2023, POU stock presents minimal leverage risk to shareholders.

Additionally, the company has the potential for opportunistic special dividends and value-enhancing share buybacks, given its growing free cash flow. In a November 2023 investor presentation, management outlined its guidance of more than doubling free cash flow from $165 million in 2023 to about $350 million this year.

Paramount Resources shares pay a monthly dividend yield of 5.1%, making it an attractive option for passive income. The dividend is comfortably covered by earnings, with a payout ratio of 35%.

Most importantly, POU stock appears to be severely undervalued, given Bay Street analysts' 48% earnings growth projections over the next five years. While its forward P/E ratio of 13.2 seems reasonable, its forward PEG ratio of 0.2 strongly suggests that Paramount Resources stock is highly undervalued right now.

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