Oil prices have surged recently due to escalating tensions between Iran and Israel, raising concerns about potential supply disruptions. For investors who missed the recent bounce in TSX oil stocks, there are still opportunities to consider undervalued oil producers poised to benefit from any further price increases.
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Canadian Natural Resources (TSX: CNQ)
Canadian Natural Resources is a major player in the Canadian energy sector, boasting a market capitalization of nearly $100 billion. Currently trading around $47.50, CNQ has seen a rise from $43.50 in recent weeks, although it was priced at $56.50 just six months ago.
This stock offers a solid investment for those seeking exposure to both oil and natural gas, complemented by a reliable dividend. CNQ has a proven track record of dividend growth, even during tough market conditions. Investors buying now can enjoy a dividend yield of 4.4%, making it an attractive option for income-focused portfolios.
Baytex Energy (TSX: BTE)
In contrast, Baytex Energy presents a riskier investment. Currently priced around $4.40, Baytex has been volatile, fluctuating from below $4 to highs of $6.30 over the past year. Despite its tumultuous history, which includes a dramatic drop in stock price after a costly acquisition in 2014, new management has improved its financial health, and Baytex now offers a dividend yield of about 2%.
For those bullish on oil and willing to embrace volatility, BTE may be an appealing option. However, conservative investors might prefer the stability offered by CNQ.
The Bottom Line on Canadian Oil Stocks
Analysts suggest that if tensions escalate, with scenarios like Iran blocking the Strait of Hormuz, oil prices could spike to as high as $200 per barrel. In such cases, Canadian oil stocks would likely experience significant gains.
However, the past six months have seen weaknesses in oil prices due to a healthy global supply and weakening demand, particularly influenced by economic challenges in China. If Middle East tensions ease, prices could quickly dip back below $70 per barrel.
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Investors should weigh these factors carefully when considering their next moves in the oil market.