Opinions
Nick Majendie
Canadian Natural Rsrcs
CNQ-T
HOLD
Sep 19, 2017
Stock price when the opinion was issued
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He's not bullish oil now (nat gas, yes), so he doesn't own CNQ, though it's run well. CNQ has a deep resource base. The value of the Oil Sands will rise because of its strategic value against the dwindling US shale producers. This is reaching the lows of this cycle. CNQ is more oil than nat gas. Pays a 5.5% dividend yield and strong balance sheet. Are paying down debt.
Won't find a single oil stock that will defy gravity if the price of oil drops. A bit more susceptible to the noise around tariffs, especially on energy, because they're not as integrated as other names. That risk has largely dissipated. About 27% gas, so not pure oil.
Best in class. Second-to-none for consistent per-share growth, profitability, FCF, returning capital to shareholders. Nice yield of 5.5%.
Oil's been under pressure, and so have energy stocks, due to concerns about global economy. All these names are in a downswing, but you're getting a pretty nice dividend here of over 5%. 200-day MA is falling, and price is just below that, so may be important inflection point to see if it breaks above. If so, would be a positive technical indicator.
Potential geopolitical rumblings around the world could put push oil price up, but that's just speculation. Sentiment on energy is rather weak. OPEC's not helping by increasing production. Valuation is very cheap compared to last 10 years and to the indices; but that doesn't mean to jump in there right now. Need more evidence of an upswing by market understanding that the global economy is not going to fall off a cliff.
Young investors don't care as much about dividend stocks, but they're really important. It's like collecting rent, instead of making money only once you sell a stock. The earlier they start, the more they reap the benefit of the compounding effect that takes place after 10, 20, 30 years of investing. Compounding is such a powerful tool.
It's hard to pick just one, as she likes a diversified portfolio. This name would be her first choice, based on today's valuation. Premium assets, low decline rate. Largest oil & gas company in Canada. Phenomenal job giving money back to shareholders via dividends and buybacks. Starting 2026, 100% of free cashflow will be returned to shareholders.
Suncor (SU-T) or Canadian Natural Resources (CNQ-T)? Both companies, relative to the other stocks in the energy index, have performed pretty well. From this point on, he likes both, and is hard-pressed to tell you which one he would choose. Both have very good growth profiles. This one has made acquisitions recently. They are both very good on M&A on an opportunistic basis. Their balance sheets have been improving steadily. Because they have both held their ground so well, there are better opportunities in some of the intermediate space, in terms of capital gains.