Canadian Natural Resources (TSX:CNQ) is up about 28% from the April low. Investors who missed the bounce are wondering if CNQ stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and capital gains.
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Canadian Natural Resources stock
CNRL trades near $45 per share at the time of writing. The stock fell as low as $35 during the tariff-induced market rout that sent the price of West Texas Intermediate (WTI) oil to as low as US$57 per barrel. The rebound in the share price followed the recovery in the oil market. WTI currently trades near US$71, but is still off the US$80 it reached last year.
CNQ has been on a downward trend over the past 12 months, hitting lower lows on each pullback after a series of sharp bounces. Investors will want to watch in the next few weeks to see if the latest spike runs out of steam as well, and leads to another 12-month low, or stabilizes, marking a change in the trend.
Oil outlook
Geopolitics fuelled the rebound over the past two months. The first leg of the bounce occurred as bargain hunters started to bet the United States and China will sort out a trade deal in a reasonable timeframe to avoid causing a severe economic downturn in both countries. China and the U.S. are the world’s largest oil users, so a severe recession would put pressure on oil demand. The latest spike in the price of oil is due to fears that the escalating tensions between Israel and Iran could prompt Iran to shut down the Strait of Hormuz, through which 20% to 30% of oil supply has to travel to reach international customers.
A series of trade deals, or an expansion of the conflict in the Middle East could push oil prices back to US$80 per barrel very quickly.
On the fundamental side, however, analysts are not very bullish. Supply growth from non-OPEC producers, including Canada and the United States, and quota cheating by some OPEC members, is keeping the oil market in a surplus position that is expected to extend into 2026. If trade deals don’t materialize or if tensions in the Middle East ease, WTI oil could head back to US$60 before the end of the year.
As always, investors should prepare for some turbulence.
CNRL earnings
CNRL delivered strong Q1 2025 results, supported by record oil and natural gas production and new revenue from its US$6.5 billion purchase of Chevron’s Canadian assets late last year. It also helps that CNRL has a WTI breakeven of roughly US$40 to US$45 per barrel.
CNRL is best known for its oil division, which includes oil sands, conventional heavy oil, conventional light oil, and offshore oil. The company is also a significant natural gas producer in Western Canada. Higher natural gas prices are helping offset some of the weakness in the oil segment.
Adjusted net earnings from operations came in at $2.44 billion in Q1 2025 or $1.16 per share. This compares to $1.98 billion and $0.94 per share in Q4 2024. A year ago the company reported Q1 adjusted net earnings of $1.47 billion, or $0.69 per share, so there is a big increase over the results in the first three months of 2024.
The board raised the dividend by 4% in March. That followed two dividend increases in 2024 and extends the annual dividend-growth streak to 25 years. Investors who buy CNQ stock at the current level can get a dividend yield of 5.2%.
Time to buy?
Near-term volatility is expected, but CNRL pays an attractive dividend that should continue to grow, even through the market turbulence. Energy bulls should put CNQ on their radar at this price and look to use pullbacks to add to existing positions.
