Why Canadian Natural Resources Limited Is the Perfect Stock for an Oil Price Rebound

For the past eight years, Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ) has hiked its dividend at a CAGR of 23%. Its balance sheet is also financially sound. Should you buy it today?

| More on:
The Motley Fool

Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ) is one of the few energy companies that has not slashed its dividend during these times of low oil prices, but has actually increased it this year.

Should you buy its shares for an oil price rebound?

Business and assets

Canadian Natural Resources is one of the largest crude oil and natural gas producers in the world. It is one of the largest natural gas producers in Canada with assets situated in northeast British Columbia and northwest Alberta.

Further, it owns North American crude oil and natural gas liquids and explores crude oil internationally in the North Sea core region and offshore Africa.

The goal of buying Canadian Natural Resources

The stock price of Canadian Natural Resources is reliant on commodity prices. So, it’s nice that it pays a dividend of 3%, but that shouldn’t be the main reason why investors buy it.

However, the dividend serves as an indicator of the health of the business and the company’s commitment to shareholders.

At the same time, the dividend provides a positive return when commodity prices head south.

Strong dividend history

Canadian Natural Resources has increased dividends for 14 years in a row. Surprisingly, it beat Suncor Energy Inc.’s dividend-growth history of 12 consecutive years. From 2007 to 2015 Canadian Natural Resources has increased dividends at a compound annual growth rate of over 23%.

However, be aware that Canadian Natural Resources occasionally increases its dividend at a low rate when the business environment is tough. For example, this year it only increased dividends by 2.2%.

However, Canadian Natural Resources raises its dividend at a high rate when the business performs well. For example, from 2013 to 2014 it raised its dividend by 80%.

In conclusion

From its 2014 high of $48, Canadian Natural Resources has fallen over 35% to below $31 today. It seemed to have consolidated around the $26 level in August and September, and is now consolidating around the $30 level.

It’s inevitable that Canadian Natural Resources shares will go higher or lower based on the movement of the underlying commodity prices. However, the business has shown commitment to a growing dividend to return capital to shareholders.

The business is financially sound with an S&P credit rating of BBB+. It strives to be an efficient and effective producer and focuses on maximizing the value of already discovered resources instead of trying to find the next major pool, which could be hit or miss.

Canadian Natural Resources is a good energy company to sit on for an oil price rebound.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Suncor Energy, Inc. (USA).

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »