Canadian Natural Resources (TSX:CNQ) has had a positive start to 2025 after a mixed performance last year.
Investors with a bullish view on energy prices are wondering if CNQ stock is undervalued right now and good to buy for a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
Canadian Natural Resources stock price
CNRL trades near $47 at the time of writing. The stock bounced around between $40 and $56 over the past year but has been on a steady upward trend after the initial crash at the beginning of the pandemic.
CNRL is best known for its oil production. The company has a diversified product portfolio that includes oil sands, conventional heavy oil, conventional light oil, natural gas liquids, and offshore oil assets. In addition, CNRL is a major natural gas producer.
The company is adept at quickly moving capital around the portfolio to take advantage of positive moves in the energy markets. CNRL is also large enough and has the balance sheet strength to make big strategic acquisitions during market downturns to drive long-term growth.
Energy outlook
Oil prices caught a bit of a new tailwind in the past few weeks after a multi-month decline last year that saw West Texas Intermediate (WTI) oil slide from US$86 per barrel in April to below US$70. Weak demand from China and rising production from non-OPEC countries like Canada and the U.S. provided the headwinds that overpowered geopolitical fears in the market.
Analysts broadly expect the situation to be similar in 2025, although traders are starting to be more positive about projected demand in China in the hope of substantial economic stimulus efforts by the Chinese government.
Geopolitical uncertainty is also starting to come into play again as markets wait to see how the new Trump administration will address ongoing conflicts. As such, volatility should be expected for the oil markets.
Natural gas prices are near 12-month highs and have been on an upward trend for several months. A cold start to the winter is causing supply drawdowns in Europe and boosting demand in Canada and the United States. In the long term, natural gas demand should be solid as countries build new gas-fired power facilities to supply electricity to meet growing demand from artificial intelligence data centres and electric vehicles.
New pipeline capacity in Canada is providing producers with additional access to global markets. This should benefit CNRL over the long run.
Dividends
CNRL raised its dividend by 7% for 2025. This is the 25th consecutive annual dividend increase from the company. The track record is impressive, given the volatility of the energy markets. CNRL’s advantage is its diversified portfolio and the fact that it tends to be the sole owner, or the majority owner, of most of the assets. This provides capital flexibility.
At the time of writing, investors can get a dividend yield of 4.8% from CNQ stock.
Time to buy?
Near-term volatility is expected, but CNQ should be a stable pick at this level for buy-and-hold investors looking for solid dividend growth and a decent yield. A surge in oil demand in China or a major supply disruption due to geopolitical unrest could quickly send oil prices materially higher. If that happens, CNQ’s share price would likely rally.
