Cenovus Energy (NYSE: CVE) and Valero Energy Corporation (NYSE:VLO) are both large-cap oils/energy companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.

Dividends

Cenovus Energy pays an annual dividend of $0.16 per share and has a dividend yield of 1.6%. Valero Energy Corporation pays an annual dividend of $2.80 per share and has a dividend yield of 3.8%. Cenovus Energy pays out 8.9% of its earnings in the form of a dividend. Valero Energy Corporation pays out 69.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Valero Energy Corporation has raised its dividend for 6 consecutive years. Valero Energy Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Cenovus Energy and Valero Energy Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cenovus Energy $11.97 billion 1.06 $1.78 billion $1.80 5.71
Valero Energy Corporation $79.10 billion 0.41 $4.86 billion $4.05 18.34

Valero Energy Corporation has higher revenue and earnings than Cenovus Energy. Cenovus Energy is trading at a lower price-to-earnings ratio than Valero Energy Corporation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Cenovus Energy and Valero Energy Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cenovus Energy 17.89% 3.20% 1.46%
Valero Energy Corporation 2.17% 8.59% 3.88%

Volatility & Risk

Cenovus Energy has a beta of 0.56, indicating that its share price is 44% less volatile than the S&P 500. Comparatively, Valero Energy Corporation has a beta of 1.19, indicating that its share price is 19% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Cenovus Energy and Valero Energy Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cenovus Energy 2 5 7 0 2.36
Valero Energy Corporation 0 7 9 0 2.56

Cenovus Energy presently has a consensus target price of $18.50, suggesting a potential upside of 79.96%. Valero Energy Corporation has a consensus target price of $73.00, suggesting a potential downside of 1.74%. Given Cenovus Energy’s higher possible upside, equities research analysts clearly believe Cenovus Energy is more favorable than Valero Energy Corporation.

Institutional & Insider Ownership

56.2% of Cenovus Energy shares are held by institutional investors. Comparatively, 80.7% of Valero Energy Corporation shares are held by institutional investors. 0.5% of Valero Energy Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Valero Energy Corporation beats Cenovus Energy on 13 of the 17 factors compared between the two stocks.

About Cenovus Energy

Cenovus Energy Inc is a Canada-based integrated oil company. It operates in the business of developing, producing and marketing crude oil, Natural Gas Liquids (NGLs) and natural gas in Canada. The Company also conducts marketing activities and owns refining interests in the United States (U.S.). Its segments include: Oil Sands, which includes the development and production of bitumen and natural gas in northeast Alberta; Conventional, which includes the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, including the heavy oil assets at Pelican Lake, the carbon dioxide (CO2) enhanced oil recovery (EOR) project at Weyburn and emerging tight oil opportunities; Refining and Marketing, which includes transporting and selling crude oil and natural gas and joint ownership of refineries in the U.S., as well as Corporate and Eliminations.

About Valero Energy Corporation

Valero Energy Corporation (Valero) is an independent petroleum refiner and ethanol producer. The Company’s segments include refining, ethanol and Valero Energy Partners LP (VLP). The refining segment includes its refining operations and the associated marketing activities. The ethanol segment includes its ethanol operations and the associated marketing activities, and logistics assets that support its ethanol operations. The Company owns logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays and other assets) that support its refining operations. Some of these assets are owned by VLP, which is a midstream master limited partnership owned by the Company. VLP’s assets include crude oil and refined petroleum products pipeline and terminal systems in the United States Gulf Coast and the United States Mid-Continent regions. Its refineries produce conventional gasolines, premium gasolines and lubricants, among others.

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