Image source: Getty Images
In most cases, Canadian investors choose their anchor holdings from the two largest sectors of the TSX: financials and energy. Banks and insurance companies comprise the financial sector, while oil and gas producers, energy equipment and service providers comprise energy.
Many blue-chip stocks in each sector are standouts in 2024, and some are strong buys heading into the fourth quarter. The best options on my list are Suncor Energy (TSX:SU) and Manulife Financial (TSX:MFC). I'll do a direct comparison and see which of the two is the better buy at the moment.
Oil reference
Suncor Energy is a North American oil bellwether and is often described as Warren Buffett's favorite Canadian stock. The investing GOAT owned the stock for almost 7.5 years before dumping his entire stake in the first quarter of 2021 due to the global pandemic.
The $64 billion integrated energy company suffered massive losses during the 2020 oil price war and the coronavirus crisis. However, Suncor has rebounded remarkably, as evidenced by its annual returns since 2021. The stock also generated an overall return of 126.2% (31.2% compounded annual growth rate) over three years.
If you invest today, the share price is $50.47 per share, while the dividend yield is 4.3%. In addition to the 22.8% year-to-date gain, quarterly payments should be secure, given the low payout ratio of 37%. Market analysts recommend a buy rating; Their average 12-month price target is $60.69.
In the first half of 2024, net profits decreased 19.2% year over year to $3.2 billion. However, cash from operating activities and free funds flow increased 72.2% and 8.5% respectively to $6.6 billion and $3.2 billion from a year earlier. Suncor's upstream production in the second quarter of 2024 reached a record 771,000 barrels per day (bbls/d).
According to Rich Kruger, president and CEO of Suncor, the second quarter was marked by momentum and high-quality execution of core upstream and downstream activities. With priorities clear and most of the maintenance planned for this year complete, Kruger expects Suncor to deliver stronger financial results in the second half of 2024.
Suncor recently announced a record 24% year-over-year increase in refining throughput to 455,000 bbls/d and an improvement in profit margins from 11.5% to 14.9%. However, fluctuating crude oil prices remain a business risk.
industry icon
Manulife Financial, a $52 billion insurance icon and financial services provider, has increased dividends per share by 67% over the past five years. The most recent increase, on February 14, 2024, was 9.6%. At $39.29 per share, current investors are up 38.9% year-to-date and participating in the 4% dividend.
In the first half of 2024, net revenue decreased 22% year-over-year to $1.9 billion, while core earnings and new business value (NBV) increased 11% and 28% to $3.5 billion and 1.4 billion dollars compared to the previous year. Its president and CEO, Roy Gori, said Manulife is transforming into a higher-return, lower-risk business. The strong momentum of the growth engines stands out, particularly the Asian market.
Frontline stocks
A fine line separates Suncor Energy and Manulife Financial because they are both mature and established companies in their respective industries. The choice could depend on sector preference, although it might be prudent to mix the blue-chip stocks in your portfolio.