Canadian Natural Resources (TSX: CNQ) is down 15% in the past 12 months. Contrarian investors are wondering if CNQ stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
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Canadian Natural Resources’s share price
CNRL trades near $41 per share at the time of writing compared to $55 in April 2024. The stock is off the 12-month low of around $35, but the overall trend has been to the downside over the past year.
Falling oil prices are to blame for the pullback. West Texas Intermediate (WTI) oil trades near US$63.50 right now compared to more than $80 last summer. Weak demand in China and rising production in non-OPEC countries, including the United States and Canada, combined to put pressure on oil prices through the second half of 2024 and into 2025. Geopolitical events have sparked some short-term spikes along the way, but traders appear to be more focused on the fundamentals.
Looking ahead, OPEC is planning to increase supply to win back some lost market share. At the same time, as negotiations between the U.S. and China drag on, and U.S. tariffs start to impact American consumers, the ongoing economic uncertainty could keep oil prices under pressure. The U.S. government is also keen on keeping fuel costs down as economists outline inflation risks due to new tariffs on goods entering the United States.
Opportunity
CNRL is raising output and still generates good margins at current oil prices. The company says its WTI breakeven price is roughly US$40 to US$45 per barrel, so the price of oil would have to fall another US$20 and stay there for some time before investors would have to start to get concerned about the dividend. That is unlikely to happen. A meaningful drop in oil prices from the current levels would lead to reduced output as companies pull back on capital expenditures to preserve cash flow. This would then push prices higher.
CNRL has a diversified portfolio of oil and natural gas production. The company is the majority or sole owner of most of its assets, which gives management the flexibility to quickly shift capital to the highest-margin opportunities as commodity prices change.
CNRL is also adept at making large strategic acquisitions during challenging times to boost production and reserves. These investments pay off when prices rebound. CNRL’s strong balance sheet and its position as the largest Canadian oil and gas producer by market capitalization enable it to do deals that are beyond the reach of most of its Canadian competitors. The US$6.5 billion purchase of Chevron’s Canadian business late last year is a good example. Contributions from the assets helped CNRL report higher adjusted net earnings from operations in the first half of 2025 compared to the same period last year.
New pipeline capacity to the three Canadian coasts is now under consideration as Canada looks for ways to reduce its reliance on the United States for its energy sales. If additional access to international buyers materializes, CNRL would benefit.
Dividends
CNRL raised the dividend in each of the past 25 years. This is a good track record for a business that relies on commodity prices to determine its profits. The strong balance sheet, rising output, and low production costs should support ongoing dividend growth. Investors who buy CNQ stock at the current price can get a dividend yield of 5.7%.
The bottom line
Near-term volatility is expected, and it wouldn’t be a surprise to see CNQ retest the 12-month low at some point in the coming months. That being said, the stock already looks cheap, and investors can use further weakness to add to the position. With a dividend yield near 6%, you get paid well to ride out the market turbulence.
