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Written by Karen Thomas, MSc, CFA at The Motley Fool Canada
The energy transition away from fossil fuels is happening. Despite recent setbacks with the election of the new U.S. president Trump, it remains a long-term secular trend. This means, we must start preparing if we have not already. Two Canadian oil and gas stocks are on my buy list for their strong positioning in this new reality.
Please read on for more on investment opportunities.
Enbridge Inc. (TSX:ENB) is one of North America’s top energy infrastructure and gas distribution companies. Its list of assets is diversified, with gas transmission assets, utilities, and renewables assets. This means that Enbridge has a broad array of energy solutions, thus giving the company a strong competitive advantage.
The energy transition is a very important consideration for Enbridge as it prepares for the future. In 2024, Enbridge’s renewables segment represented 4.3% of its earnings before interest, taxes, depreciation, and amortization (EBITDA). While this is a relatively small amount, it is much higher than the prior year, which was at less than 1% of total EBITDA.
Along with its unmatched position in the energy space, investors in Enbridge have the benefit of a low-risk dividend. This dividend is backed by a low-risk cash flow profile, with regulated revenue, long-term contracted revenue, and take-or-pay contacts. In fact, Enbridge has increased its dividend for 30 consecutive years, and the stock is currently yielding a generous 5.9%.
Like Enbridge, Tourmaline Oil Corp. (TSX:TOU) is also preparing for the energy transition. For Tourmaline, this was easy, as it’s a natural gas company. And natural gas is considered a transition energy source because it’s significantly cleaner than the energy source that it’s mostly replacing – coal.
One of Tourmaline’s big opportunities is the booming liquified natural gas industry. North America’s natural gas is seeing strong demand from this, as it’s opened up to the globe, which so desperately needs energy. Because our natural gas is relatively cheap, abundant, and reliable, it’s in high demand.
LNG Canada, which is located in Kitimat, British Columbia, was built to export LNG out east. It’s expecting first shipments sometime in 2025, and the demand from the facility will support natural gas producers like Tourmaline.
Already, the company has been benefitting from strong demand, as it’s connected to US LNG facilities. This has supported strong cash flows and a growing dividend. In fact, Tourmaline paid out record dividends in 2024 – a regular dividend of $1.40 per share along with special dividends totaling $2 per share. This brought the company’s dividend yield to an impressive 5.5% based on today’s share price.