A Dividend Giant I’d Buy Over Suncor Energy Stock

Here’s why Canadian Natural Resources may outpace Suncor Energy in the upcoming decade.

| More on:
data analyze research

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With a dividend yield of 4%, Suncor Energy (TSX:SU) is quite popular among income-seeking investors in Canada. Moreover, in the last two decades, the Canadian energy stock has increased its dividend payouts by 15% annually, which is exceptional. Since August 2004, Suncor stock has returned close to 400% to shareholders if we adjust for dividend reinvestments. However, Suncor Energy has trailed the TSX index, which has returned 411% to investors in this period.

Despite its impressive dividend growth, Suncor Energy was forced to lower its dividends by 55% when crude oil prices fell off a cliff at the onset of COVID-19. As dividend payouts are not guaranteed, it’s crucial to invest in companies that can maintain and even raise dividends amid economic downturns.

Here is one TSX dividend giant I’d buy over Suncor Energy stock right now. Let’s see why I’m bullish on Canadian Natural Resources (TSX:CNQ) at its current valuation.

Created with Highcharts 11.4.3Suncor Energy + Canadian Natural Resources PriceZoom1M3M6MYTD1Y5Y10YALL22 Aug 201422 Aug 2024Zoom ▾20152016201720182019202020212022202320240www.fool.ca

Is Canadian Natural Resources a good buy?

Valued at $103 billion by market cap, Canadian Natural Resources has crushed broader market returns, surging over 1,500% in the last 20 years after adjusting for dividend reinvestments. Despite its stellar gains, CNQ stock offers a tasty dividend yield of 4.3%, given its annual dividend payout of 4.2%.

Canadian Natural Resources owns and operates a diversified portfolio of assets in North America, the U.K. portion of the North Sea, and Offshore Africa, which enables it to generate significant value for shareholders.

Its balanced mix of natural gas, light crude oil, heavy crude oil, bitumen, and synthetic crude oil represents one of the most robust and diversified asset portfolios of any independent energy producer.

Canadian Natural Resources completed the transition of long-life, low-decline asset base through the development of its oil sands mining, vast thermal in situ opportunities and expansion of its polymer flood project at Pelican Lake.

A strong performance in Q2 of 2024

In the June quarter, Canadian Natural Resources delivered strong results, which included adjusted net earnings of $1.9 billion and adjusted funds flow of $3.6 billion, driving significant returns to shareholders totalling $1.9 billion. Comparatively, it paid shareholders $1.1 billion in dividends, indicating a payout ratio of less than 50%.

Canadian Natural Resources aims to return 100% of its free cash flow to shareholders as its net debt exceeds the management target of $10 billion. CNQ has increased its dividends every year for the last 24 years. In this period, its dividends have risen by 21% annually.

Earlier this year, Canadian Natural Resources produced its one billionth barrel of bitumen since operations began in 2009. At the end of 2023, its significant synthetic crude oil reserves totalled 6.9 billion barrels, with a reserve life index of 44 years.

Is CNQ stock still undervalued?

Priced at 10.5 times forward earnings, CNQ stock is relatively cheap, given its adjusted earnings are forecast to expand from $3.78 per share in 2024 to $4.61 per share in 2025. Analysts remain bullish on CNQ stock and expect it to gain over 15% in the next 12 months.

Should you invest $1,000 in Canadian Natural Resources right now?

Before you buy stock in Canadian Natural Resources, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Canadian Natural Resources wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

grow money, wealth build
Dividend Stocks

Why I’d Invest $10,000 in This Undervalued Dividend-Growth Stock for Decades of Income

This undervalued dividend stock offers a high yield of over 8% and can help you earn more than $200 in…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Consumer Spending Plays Amidst the Current Market Dip

Consumption may go down in market dips, but certain consumer stocks are certainly better off than others.

Read more »

Asset Management
Dividend Stocks

12% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades

Stocks with high-dividend yields carry risks. But they could be a good long-term investment. Here is a 12% dividend stock…

Read more »

Canadian flag
Dividend Stocks

How I’d Build a Foundation of Canadian Value Stocks in My Investment Strategy

Canadian investors can explore iShares Canadian Value Index ETF for value stock ideas to build a foundation for their diversified…

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Transform a $30,000 TFSA Into a Cash-Flow Machine

Here's why TFSA investors should consider owning dividend stocks such as Mullen Group in 2025.

Read more »