In most cases, Canadian investors choose their anchor holdings from TSX's top two heavyweight sectors, financials and energy. Banks and insurance companies comprise the financial sector, while oil and gas producers, energy equipment, and services providers comprise energy.
Many blue-chip stocks from each sector stand out in 2024, and some are strong buys heading into the fourth quarter. The top picks in my list are Suncor Energy (TSX:SU) and Manulife Financial (TSX:MFC). I will give a head-to-head comparison and see which of the two is the better buy right now.
Oil bellwether
Suncor Energy is an oil bellwether in North America and is often described as Warren Buffett's favourite Canadian stock. The GOAT of investing owned the stock for almost 7.5 years before unloading all his stake in Q1 2021 due to the global pandemic.
The $64 billion integrated energy company incurred massive losses during the 2020 oil price war and coronavirus crisis. Nonetheless, Suncor recovered remarkably, as evidenced by its yearly profitability since 2021. The stock also delivered an overall return of 126.2% (31.2% compound annual growth rate) in three years.
If you invest today, the share price is $50.47 per share, while the dividend yield is 4.3%. Besides the 22.8% year-to-date gain, the quarterly payouts should be safe, given the low 37% payout ratio. Market analysts recommend a buy rating; their 12-month average price target is $60.69.
In the first half of 2024, net earnings declined 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 ago. Suncor's upstream production in Q2 2024 reached a record 771,000 barrels per day (bbls/d).
According to Rich Kruger, President and CEO of Suncor, the second quarter was about momentum and high-quality execution of major upstream and downstream activities. Because of clear priorities and the bulk of planned maintenance this year is complete, Kruger expects Suncor to deliver stronger financial results in the back half of 2024.
Suncor recently announced a record-breaking 24% year-over-year increase in refining throughput to 455,000 bbls/d and profit margins improvement 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 raised 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 partake in the 4% dividend.
In the first half of 2024, net income declined 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 from a year ago. Its President and CEO, Roy Gori, said Manulife is transforming toward a higher return and lower risk business. He notes the strong momentum of the growth engines, particularly the Asian market.
Blue-chip stocks
A thin line separates Suncor Energy and Manulife Financial because both are mature, established companies in their respective industries. The choice could depend on sector preference, although combining the blue-chip stocks in your portfolio might be wise.
