Canadian investors are searching for top TSX stocks to add to a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) focused on dividends and long-term total returns.
Many TSX stocks are trading near record highs, but investors can still find deals in some sectors that have underperformed the overall market in the past year.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) trades near $45 per share at the time of writing, compared to $55 at its high point in 2024.
The stock actually dipped as low as $35 in April this year during the tariff-induced market correction. Since then, bargain hunters have steadily moved into CNQ to pick up a nice yield and get positioned for an eventual rebound in energy prices.
Opportunity
CNRL is a major producer of oil and natural gas. The oil assets include oil sands, conventional light and heavy oil, and offshore oil production. On the natural gas side, the company has extensive production and reserves in Western Canada. The completion of the Trans Mountain expansion last year added important oil pipeline capacity for Canadian oil producers to get their product to export facilities in British Columbia. Additional capacity is expected to come online in the next few years through several brownfield projects. These will provide extra export capacity. At the same time, Canada could potentially see a new pipeline built to connect Alberta to tidewater. This would enable CNRL and its peers to ramp up output for the coming decades.
New natural gas export capacity is also on the way. The completion of the Coastal GasLink pipeline is already connecting producers to the new LNG Canada export facility. Additional liquified natural gas (LNG) export sites are planned or already under construction. This will enable CNRL to sell natural gas to international buyers in higher-priced markets.
Demand for natural gas is expected to grow in the coming years as countries build gas-fired power generation facilities to supply electricity for AI data centres.
Risks
Analysts broadly expect the global oil market to remain in a surplus position through the first part of 2026 and possibly into 2027. Record production in Canada and the United States, along with increased supply from OPEC, will bump up against slow demand growth in China and potentially the United States. This could keep oil prices under pressure. West Texas Intermediate (WTI) currently sells for US$57 per barrel. It was above US$80 last year.
CNRL outlook
CNRL continues to deliver profit growth, despite the challenging market conditions. The company is offsetting the drop in oil margins by ramping up production through acquisitions and drilling programs. CNRL is very efficient at capital allocation and has the balance sheet strength to buy large assets that come up for sale during downturns in the market. Commodities go through cycles. A recovery in prices will eventually materialize.
Dividends
CNRL raised the dividend in each of the past 25 years. Investors should see the trend continue, even as commodity prices face headwinds. At the current share price, investors can pick up a dividend yield of 5.2% from CNQ.
Time to buy?
Lower oil prices are possible in the coming months. As such, there could be additional weakness on the way for energy stocks. That being said, the market will eventually rebalance, and CNRL pays an attractive dividend that should continue to grow.
If you have some cash to put to work in a buy-and-hold portfolio, this stock deserves to be on your radar. Further downside would be viewed as an opportunity to add to the position.
