TFSA Investors: Time to Buy Canadian Natural Resources (TSX:CNQ)

Canadian Natural Resources Ltd. (TSX:CNQ) (NYSE:CNQ) reports strong cash flows, an increase in its dividend and share buybacks, all aimed at returning value to shareholders, making CNQ stock is top TFSA pick.

Canadian Natural Resources Ltd. (TSX: CNQ)(NYSE: CNQ) reported first-quarter 2019 results that demonstrate why this stock is a top TFSA pick for exposure to the energy sector and for regular reliable dividend income and strong capital gains potential.

This $45 billion energy giant trades at a price-to-earnings ratio of 15 times this year’s consensus expected earnings, and at a price-to-cash flow of less than six times earnings, remaining attractively valued.

Right now, investor sentiment around the energy sector is poor, which isn’t a big surprise given the many issues that have plagued the sector.

So many quality stocks like CNQ are seeing a lack of interest, a lack of demand.

Here’s what the first-quarter results say about why this should change.

Oil prices significantly higher

This, we already know. But while oil prices have soared since December 2018, they are still down versus one year ago, and energy stocks reflect this.

CNQ stock is trading at around the same level as three years ago and down 18% versus one year ago. Cash flow from operations in 2014 was $8.4 billion. It was $10.1 billion in 2018.

Also, what strikes me about this energy stock’s price chart over the last few years is that it is relatively steady, while of course being backed up by its strong cash flows and dividend.

Cash flow party

While production was down sequentially due to the mandated production curtailments, Canadian Natural continued to impress with its cash flows.

First-quarter cash flow came in at $2.24 billion, 82% higher sequentially and only marginally lower than first quarter 2018, when oil prices were higher.

Recall that in the fourth quarter of 2018, the company generated $1.2 billion in cash flow, or $1.02 per share, despite the Canadian oil differential widening dramatically during the quarter.

Returning cash to shareholders

With 15 years of consecutive dividend increases behind it and a current dividend yield of almost 4%, Canadian Natural clearly has a strong track record of being a solid and reliable dividend-paying stock for TFSA investors.

In the first quarter of 2019, CNQ increased its dividend by 12%.

Another reflection of management’s confidence in its ability to continue to generate strong cash flows is the company’s continued buy back of its stock, repurchasing 6.65 million shares in the quarter, and 4.05 million shares already being repurchased in the second quarter.

Final thoughts

For TFSA investors, Canadian Natural is a top energy stock to own for its strong dividend yield, its strong track record and its upside to rising oil and gas prices.

When sentiment turns positive for the energy sector, Canadian Natural has big upside due to its top quality operations and its strong cash flow generating capability.

Fool contributor Karen Thomas owns shares of Canadian Natural Resources and CDN NATURAL RES.

More on Dividend Stocks

ETFs can contain investments such as stocks
Dividend Stocks

How to Use a TFSA to Generate $200 in Monthly Tax-Free Income

Use a TFSA to build $200 in monthly tax-free income with XEI and ZRE. See how these ETFs work and…

Read more »

Business success of growth metaverse finance and investment profit graph concept or development analysis progress chart on financial market achievement strategy background with increase hand diagram
Dividend Stocks

Smart Ways to Invest Extra Income and Say Goodbye to Financial Stress

Canadians have ways to make their extra income work as hard as they do and say goodbye to financial stress.

Read more »

Two seniors walk in the forest
Dividend Stocks

Sun Life Stock Pays 3.3%: How Much to Invest for $100 a Month in Dividends

Sun Life Financial (TSX:SLF) might be a massive bargain after Thursday's vicious plunge as stock markets sold off hard.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn Your TFSA Into $1,000 a Month in Tax-Free Income

Build toward $1,000 a month in tax-free income with a TFSA. See how Enbridge, Scotiabank and ZWC could help, and…

Read more »

customer fills up car with gasoline
Dividend Stocks

How Much Emergency Money Do Canadians Actually Need?

A safety fund equivalent to 3 to 6 months of living expenses is generally the baseline buffer that Canadians would…

Read more »

woman holding steering wheel is nervous about the future
Dividend Stocks

Still Up Double Digits This Year: Should You Still Invest in TSX Stocks After Thursday’s Dramatic Drop?

The TSX has gained about 136% over the past decade. So, stay invested, dollar‑cost average, and maintain diversification. 

Read more »

Real estate investment concept
Dividend Stocks

Intact Stock: Would I Buy It for Growth, Income, or Both?

Intact’s modest yield makes profitable long-term growth the main attraction, with catastrophe losses putting the next purchase to a test.

Read more »

hiker with backpack in the mountains
Dividend Stocks

2 Top Canadian Dividend Stocks for $1,850 in Annual Passive Income

With reliable cash flows, high dividend yields, and strong growth prospects, these two Canadian stocks suit income-seeking investors.

Read more »