If you are nearing retirement, you may be anxious that pension plans such as the Canada Pension Plan (CPP) and Old Age Security (OAS) are not enough to cover your expenses. The maximum monthly payout via the CPP is just over $1,300 in 2023 while the maximum OAS payment is significantly lower at less than $700.
Further, rising inflation and interest rates are eating away at your savings while lowering the purchasing power of households in the past two years.
Canada is on the cusp of a retirement crisis
A report by the Healthcare of Ontario Pension Plan (HOPP) states that 44% of Canadians were unable to add to retirement savings in the last year. It’s evident that Canadians are struggling to save for retirement if we look deeper into the HOPP report, which outlines troubling trends for Canadians in the age group between 55 and 64.
The report states that 44% of respondents have savings of less than $5,000, while 75% have less than $100,000 in savings. Moreover, a fifth of the workers have not set anything aside for retirement and solely depend on the CPP and OAS.
Canada may be heading towards a retirement income crisis, especially for those without an employer-sponsored pension plan. So, it’s advisable to create a passive-income stream by investing in blue-chip dividend stocks such as Canadian Natural Resources (TSX:CNQ).
Is CNQ a good dividend stock to buy?
Canadian Natural Resources is among the largest companies on the TSX. An energy giant, CNQ offers you a tasty dividend yield of 4.4%. Moreover, these payouts have risen by over 20% annually in the last 23 years, which is exceptional.
In the third quarter (Q3) of 2023, CNQ generated an adjusted funds flow of $4.7 billion and adjusted debt earnings from operations of $2.9 billion due to strong pricing and good cost control, which contributed to solid netbacks on record quarterly production.
Canadian Natural Resources has a diversified portfolio, which includes its long-life, low-decline assets. Its asset base, coupled with efficient operations, enabled CNQ to deliver robust returns to shareholders via dividends and share buybacks.
In the first 10 months of 2023, the company returned over $6 billion to shareholders in dividends and buybacks. Its board of directors also approved an 11% increase to the quarterly dividend, showcasing the resiliency of company cash flows.
CNQ ended Q3 with a strong financial position with a debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) of 0.7 times. It continues to maintain strong liquidity, including bank facilities, cash, and other short-term investments.
The energy giant ended Q3 with $6.1 billion in total liquidity and is quickly approaching a net debt level of $10 billion by Q1 of 2024, after which it aims to distribute 100% of cash flows to shareholders.
Canadian Natural Resources is a blue-chip TSX stock and is a top investment choice when you combine its execution with its large, balanced, low-risk, high-value reserves and flexible capital-allocation policy.
Priced at less than 10 times forward earnings, CNQ stock is quite cheap, given its steady cash flows and robust dividend growth. Analysts remain bullish and expect shares to surge by 10% in the next 12 months.
