The Canadian energy sector is among the most reliable industries for Canadian stock market investors to find high-quality, long-term investments for their self-directed portfolios. Among them, Canadian Natural Resources Ltd. (TSX:CNQ) has been a reliable dividend stock for many investors.
Up by 27.1% from its 52-week low at the time of writing, CNQ stock still trades at an almost 15% discount from its 52-week high. Investors who missed the rebound from its 52-week low are wondering whether it is still undervalued and good to add to their holdings.
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Canadian Natural Resources
Canadian Natural Resources is a $92.9 billion market-cap energy giant headquartered in Calgary. It is one of Western Canada’s largest oil and natural gas producers. The stock trades at around $44 per share at the time of writing, down from a high of around $52. Energy stocks across the board declined just a few months ago, on account of lower crude oil prices.
CNQ stock is a massive company in the Canadian energy industry. It has an extensive and diversified portfolio of assets. Its portfolio includes oil sands, conventional heavy oil and light oil, offshore operations, natural gas production, natural gas liquids, and reserves.
The company has historically boasted a strong balance sheet, and its well-run business model has allowed management to make key decisions at opportune times. The acquisition of Canadian assets owned by Chevron in 2024, amounting to around US$6.5 billion, is the most recent example of the company’s ability to make well-timed strategic acquisitions.
CNQ says that it needs a West Texas Intermediate (WTI) oil price between US$40 and US$45 per barrel to break even. As of this writing, WTI trades at almost US$70 per barrel. While down from US$80 per barrel last year, WTI crude trades at a level that lets CNQ stock generate substantial margins.
The company’s natural gas segment also offers it a sizeable hedge against lower crude oil prices. Natural gas is more expensive than it has ever been, making the situation more favourable for the company’s balance sheet.
Dividends
Canadian Natural Resources stock has paid its investors their dividends for decades. For the last 25 years, CNQ stock has increased its payouts to investors without fail. Considering the cyclical nature of the industry, this is a fantastic track record. Volatile commodity prices have a major impact on company financials. Despite that factor, CNQ stock pays dividends at a juicy 5.3% dividend yield that it pays quarterly.
The company’s increased production through drilling programs and acquisitions allow it to generate solid earnings. Despite potential headwinds due to geopolitical factors, CNQ stock looks well-positioned to continue supporting dividend growth.
Foolish takeaway
There are plenty of potential headwinds that can have a negative impact on its performance in the coming weeks. If negotiations with the US do not pan out favourably, its share price might get closer to the 2025 lows. However, there’s always the chance that things will work out.
In case prices go low again, it might be wise to hold off on going all out and buying up CNQ stock shares left, right, and center. However, its current share price and inflated dividend yield make it too attractive to ignore entirely. It might be a good idea to allocate at least some capital to investing in CNQ stock at current levels.
