Canada is known for the world’s fourth-largest oil sands reserves, which make the energy sector a major contributor to Canada’s export-led economy. Investing in one’s strength is a no-brainer, and when it is a commodity like energy, the one with cost and proximity advantage stands to benefit. This makes Canadian Natural Resources (TSX:CNQ) a no-brainer energy stock to buy right now with $500.
This no-brainer energy stock trades near its 52-week high
Buying a cyclical energy stock at its high doesn’t make sense, as it will dip during a cyclical downturn. However, returns are not always based on buy the dip and sell the rally. The energy sector has been in a cyclical upturn since 2022, when the Russia-Ukraine war altered the global oil supply chain.
If you kept waiting for the dip, you missed the opportunity to earn high dividend growth.
| Year | CNQ Dividend per share | YoY Growth |
| 2025 | $2.3500 | 9.9% |
| 2024 | $2.1375 | 15.5% |
| 2023 | $1.85 | 19.4% |
| 2022 | $1.55+ Special Dividend of $0.75 | 55.2% |
| 2021 | $0.99875 | 17.5% |
| 2020 | $0.85 | 13.3% |
Canadian Natural Resources has a moat that makes it a buy even at a higher share price.
Low-cost reserve
Canadian Natural Resources has the world’s second-largest low-cost, long-life oil sands assets, which result in lower maintenance costs. The company processes crude oil and sells a mix of Synthetic Crude Oil (SCO), WTI crude, and liquified natural gas. Its average cost per barrel is mid $40s, which includes dividend and maintenance costs. This helps it pay and grow dividends even when the WTI crude price falls near US$50/barrel.
Operating efficiency
Building a refinery is expensive. To keep costs low, Canadian Natural Resources connected new production sites to existing central processing facilities. This helped CNQ produce more oil without incurring the capital cost of building a refinery. Moreover, the existing refinery is used at optimum levels, improving operating efficiency and reducing costs.
Discipline in debt management
CNQ has spent its capital on acquiring more oil reserves. These reserves were immediately accretive as the oil produced and sold from the new reserves is being used to pay down the debt taken to acquire these reserves. CNQ has a net debt of US$17.2 billion, above its guided range of US$12 billion–US$15 billion, where it allocates 100% to 60% of its free cash flow for shareholder returns.
CNQ maintains a strong balance sheet due to the management’s financial discipline. This helps it pay and grow dividends, even during the oil crisis.
Buy this energy stock for dividends
Canadian Natural Resources is a stock to buy for its dividends and not its share price. The share price surged as its production output is attracting a higher price. However, oil prices are normalizing. Its high production reserves may not generate the same kind of returns when the oil price falls. At times like these, CNQ reduces capital expenditures and production. It focuses on reducing debt and buying back shares.
Canadian Natural Resources has been growing dividends between 2% and 56% for the last 25 years. It grew dividends during the 2008 Financial Crisis, the 2016 oil crisis, the pandemic, and even the 2025 tariff war.
How does it manage to increase dividends every year?
The company keeps buying back shares and uses debt to fund expansion and capital expenditures. Its low production cost and rich product mix ensure the company enjoys positive free cash flow. The dividend is integrated into the cost per barrel that ensures the dividend is paid.
Canadian Resources is increasing production. Higher cash flow resulting from increased production volumes is something the company can control, and from that, it pays for dividend growth. Any cash flow increase resulting from a change in oil prices attracts a special dividend, which is separate from the quarterly dividends.
As an investor, you get an upcycle benefit through a special dividend, stability in the normal cycle, and an assured dividend in a downturn.
