Canadian Natural Resources (TSX:CNQ) has been on a downward trend for much of the past year. Investors who missed the post-pandemic rally are wondering if CNQ stock is now undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend income and long-term total returns.
CNRL share price
Canadian Natural Resources trades near $40 per share at the time of writing. The stock was as high as $53 a year ago and recently bounced off the 12-month low around $35.
Falling oil prices are to blame for most of the pullback. CNRL is a major Canadian oil producer with oil sands, conventional heavy oil, conventional light oil, and offshore oil reserves. It is also a leading natural gas producer. The diverse assets are one reason CNRL has been able to deliver solid results despite the volatility of commodity prices.
CNRL is the sole or majority owner of most of its projects. This gives management the flexibility to shift capital around the portfolio relatively quickly to take advantage of the best opportunities in the energy market. CNRL also has a strong balance sheet, and its size gives it the financial clout to make large strategic acquisitions when opportunities arise during challenging times in the energy sector.
Earnings
CNRL generated strong 2024 results, even as prices declined. This is due to record total production. Weaker prices, however, still resulted in lower annual profits. Adjusted net earnings from operations came in at $7.4 billion for the year compared to $8.5 billion in 2023.
In the fourth-quarter (Q4) 2024 report released in early March, CNRL said production for January and February of this year was very high. CNRL is also benefitting from revenue coming from its US$6.5 billion acquisition of Chevron’s Canadian assets late last year.
Dividends
CNRL raised the dividend twice in 2024 and already increased the payout again in 2025, extending the consecutive annual dividend-growth streak to 25 years.
Oil market outlook
The price of West Texas Intermediate (WTI) oil is US$57 per barrel at the time of writing compared to just under US$80 in early May last year. Supply growth in non-OPEC countries, including Canada and the United States, combined with weak demand in China put pressure on oil prices in the second half of last year.
Geopolitical tensions have sparked some brief upside surges, but recession fears caused by a potential trade war are now overpowering the geopolitical risks for supply disruptions. If the United States slides into an extended recession and China’s economy weakens further, oil prices could continue their downward trend over the coming months. Analysts widely expect the market to be in a surplus position into 2026. CNRL says its WTI breakeven price is US$40 to US$45, so the company is still generating good margins to support dividend growth.
Quick trade agreements between the U.S. and China could spark a rally. Any indication from OPEC that it will restrict supply to support market prices could also provide a new tailwind. The latest messaging from the cartel, however, is that it plans to boost output, which is why oil is now at a new 12-month low.
Time to buy CNQ stock?
Near-term headwinds are expected, and the stock could easily retest the 12-month low in the coming weeks. That being said, income investors might want to start nibbling at this level and look to add on any additional weakness. You currently get paid a solid 5.9% dividend yield to ride out the turbulence. Positive news on trade deals could send oil prices and the stock sharply higher.
