Q: I'm interested in an energy name that I can hold for a minimum of 5 years with good dividends and reliable long term growth? I'm torn between an ETF with less volatility like XEG and an individual stock like CNQ with its higher growth? What do you suggest? Should I wait for a better season?
5i Research Answer:
We think both are fine names to get exposure to the energy sector. CNQ is a high-quality business that has an above-average track record of raising dividends. That said, XEG would be a less volatile approach due to the diversification, but it could also experience less in total returns as not many energy names will be as high-quality as CNQ. At the end of the day, it depends on an investors’ appetite for risk. XEG’s largest position is also CNQ, which is around a quarter of the portfolio. If an investor is looking for a more conservative approach, XEQ may be a better option, but if an investor wants attractive prospective returns, we feel owning some of the best names in the sector like CNQ would be the better approach.