Oil & Gas Vs Clean Energy Stocks: The YTD Returns Hold Interesting Cue

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Forget fossil fuels are likely to get completely replaced by clean energy soon. Despite that, the last one-year return of S&P/TSX Equal Weight Oil & Gas Index was a whopping 62.83 per cent.

Yes, the ‘pollutants’ are in demand.

Moreover, in 2020, the federal government reportedly gave C$ 1.9 billion in subsidies to companies that are operating in fossil fuels sector. A report by Environmental Defence, a Canadian environmental research firm, sheds light on government’s fiscal support to fossil fuel companies reflecting how it dwarfs government’s fiscal commitment to new climate plan.

Findings from S&P/TSX Equal Weight Oil & Gas Index

 

The index is made up of eight companies, including big players like TC Energy Corporation (TSX: TRP), Enbridge Inc. (TSX: ENB), and Imperial Oil Ltd (TSX: IMO).

The five-year (annualized) return data shows a downfall of 5.41 per cent. The three-year (annualized) return data is again in the red, dipping further to 9.44 per cent.

However, what brings the spotlight back on the oil and gas sector is the last one-year return data as mentioned above. The YTD figure isn’t bad either. Since January 1, 2021, the index has given 27.73 per cent return till market closure on April 15, 2020.

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Findings from S&P/TSX Renewable Energy and Clean Technology Index

The index is made up of 20 companies, including big players like Brookfield Renewable Partners LLP (TSX: BEP.UN), Innergex Renewable Energy Inc. (TSX: INE), and TransAlta Renewables Inc. (TSX: RNW).

Although the five-year (annualized) return and three-year (annualized) return data show a positive return of 16.35 per cent and 23.27 per cent respectively, the YTD figure till April 15, 2020 is surprisingly in the negative territory, down by 0.06 per cent. However, the one-year return data of this index shows a positive return of 72.62 per cent.

Cues from Government Support

Amid uncertainties of pandemic and lower-than-expected economic growth, combined with a high unemployment rate, subsidies of nearly C$ 2 billion to the so-called ‘pollutants’ can be justifiable.

With fiscal support of such amount, oil and gas industry participants, including such other players as Suncor Energy (TSX: SU) and Pembina Pipeline Corporation (TSX: PPL), can be a good buy.

The YTD figures of S&P/TSX Equal Weight Oil & Gas Index and S&P/TSX Renewable Energy and Clean Technology Index show an interesting picture where the oil and gas companies are winning with a considerable margin.


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