Blue-chip energy stocks such as Canadian Natural Resources (TSX: CNQ) and Suncor Energy (TSX: SU) have delivered stellar returns to shareholders in the past decade. Since December 2015, CNQ and Suncor have returned 378% and 155%, respectively, after adjusting for dividend reinvestments.
Despite these inflation-beating returns, both Canadian energy stocks offer a dividend yield of roughly 5%, making them attractive to income-seeking investors. So, let’s see which TSX energy stock is a better buy right now.
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Is this TSX dividend stock a good buy?
Valued at a market cap of almost $100 billion, Canadian Natural Resources’ oil production is close to 1.6 million barrels of oil equivalent per day. Armed with an exceptional reserve base across 27 million acres of land and a reserve life index of 32 years, the growth story for CNQ stock is far from over.
Canadian Natural is the second-largest oil and gas company globally by reserves, which provides unmatched long-term visibility and development optionality.
Its diversified asset base includes conventional oil and gas, thermal in situ operations, and oil sands mining with upgrading facilities. CNQ has identified growth opportunities totalling approximately 745,000 barrels per day across all three segments.
The company maintains a weighted-average interest rate of 5% on its debt, with over 90% locked at fixed rates, providing stability amid a volatile rate environment. With a net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio at just 0.9 times, the balance sheet remains robust while supporting a dividend yield exceeding 5%.
CNQ has raised its annual dividend from $0.48 per share in 2016 to $2.13 per share in 2024. Analysts forecast the annual payout to increase to $2.60 per share in 2029.
Is this TSX energy stock undervalued?
In the last two years, Suncor Energy has focused on business transformation initiatives, allowing it to deliver record performance. In Q3, it produced 870,000 barrels per day, its best third quarter ever. It ended Q3 with an upgrader utilization rate of 102% and a refining utilization rate of 106%. These achievements came despite significant turnaround activity, which demonstrates exceptional operational execution.
Suncor’s integrated business model provides unique advantages. In the September quarter, it reported an adjusted funds from operations of $3.8 billion despite lower oil prices. The energy giant attributed its strong performance to systematic improvements in asset utilization, turnaround execution, and cost management.
The company has reduced its WTI (West Texas Intermediate) breakeven by nearly $10 per barrel over two years, while maintaining consistent monthly share buybacks of $250 million regardless of commodity prices. Year to date, Suncor has repurchased 3.4% of outstanding shares at an average cost of $53, supporting future dividend growth. The Board recently approved a 5% dividend increase to $2.40 annually.
Suncor Energy has raised its annual dividend from $1.16 per share in 2016 to $2.22 per share in 2024. Analysts forecast the annual payout to increase to $2.61 per share in 2029.
The Foolish takeaway
For investors seeking decades of development runway, Canadian Natural Resources offers unparalleled optionality.
Given consensus price targets, CNQ stock trades at a 12% discount in December 2025. If we adjust for dividends, cumulative returns should be closer to 17%. Comparatively, Suncor Energy might return less than 10% over the next 12 months, given consensus price targets and its forward yield.
