Retirement planning can build anxiety. You will always think, “Am I investing enough for my retirement?” To ease this anxiety, you need to build a portfolio that grows with inflation. The real inflation is visible in the rising prices of food, real estate, and medical, which are far more than 3%.
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Building a retirement portfolio
Your retirement portfolio needs a component that pays regular income in every market condition, giving you assurance of utility bill payments. This need can be met through top TSX dividend stocks, but relying on them alone may not be the ideal portfolio. Also invest in growth stocks that can generate wealth to help you with expense shocks.
About dividend stocks, you should keep accumulating them over the years to build a passive-income pool equivalent to 30-40% of your household expenses.
The top TSX dividend stock for retirement planning
Canadian Natural Resources (TSX:CNQ) is a perfect stock to build passive income if your retirement is at least 10 years away. The company has low-maintenance, high-reserve oil sands fields, which gives it an edge over other oil companies in terms of profits.
How does this dividend stock manage to sustain dividends
Being an oil and gas producer, its earnings are exposed to West Texas Intermediate crude price volatility. However, its dividends are not materially affected by price fluctuations because the company incorporates the dividend amount in its breakeven price of mid-US$40s per barrel.
Canadian Natural Resources even managed to pay and grow dividends when oil prices fell near the US$40 price for a brief period in 2020 and during the 2014 oil crisis. For this, it maintains a dividend payout ratio below 100%.
Its free cash flow policy states that when net debt is below $12 billion, 100% free cash flow goes towards shareholder returns. The returns include share buybacks and dividends. If dividend falls short in a year, it can adjust the amount allocated to buybacks.
Also, when oil prices grow significantly, Canadian Natural Resources does not grow its dividend significantly, as it won’t be able to sustain it when oil prices fall. Instead, it gives out special dividends, buys back more shares, acquires new oil reserves to expand production, and accelerates debt repayment during the cyclical upturn.
How does this dividend stock manage to sustain dividend growth
Canadian Natural Resources has been growing its dividend for the last 25 years. The dividend-growth rate slowed to 2% during the oil crisis and increased as much as 56% in an upcycle. However, the company never cut its dividend because oil sands have lower maintenance costs than shale gas exploration.
The company increases its dividend, looking at cash flow growth from production capacity and product mix, which it can control. In 2024, it purchased new oil reserves that significantly increased its debt to over $18 billion. It is using the money earned from the new reserves to lower its debt to $12 billion in the next two to three years. This resulted in a slowdown in dividend growth from 15.5% in 2024 to 9.9% in 2025. You can expect slow single-digit growth for 2026 as well until net debt is reduced.
How Canadian Natural Resources helps you with retirement planning
The company has grown dividends at an average annual rate of 21.8% in the last six years and 25 years. It is way above the average inflation rate. The $0.85 dividend per share in 2020 grew to $2.35 in 2025. If you owned 1,000 shares of CNQ, $850 dividend in 2020 is now $2,350.
Imagine buying 70 shares every year for 15 years; you can accumulate 1,050 shares. To buy 70 shares of CNQ today, you need $3,108. If the company continues to grow dividends by 10% annually, you will earn an annual income of $9,370 in the 15th year. In addition to buying 70 shares with your income, you can also reinvest the dividend to buy more shares and compound your returns. This can help you build a sizeable passive income in the long term and keep growing it even after you retire.
