Opinions
James Telfser
Canadian Natural Rsrcs
CNQ-T
BUY
Jul 25, 2024
Stock price when the opinion was issued
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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.
A couple of years ago energy was the place you had to be, and stocks have been sliding since then. Tariffs are slowing things down and gumming up global supply chains. OPEC wants to increase production. With the oil price where it is, there isn't a lot of drilling going on.
There's too much oil right now going into the fall, but oil has a way of tightening itself up. If oil stays lower for longer, there's more drive to get that price higher later. This is the stock in Canada you want to own for sector exposure, sit and collect the dividend, and be there for when the oil price goes higher. Doesn't seem as though there's any catalyst for that to happen in the next 6 months. Yield is ~5%.
About 70% oil, 30% natural gas. That gives you diversification. Trades ~12x PE. Good value, and will continue to grow. Buying back a lot of stock. Exporting energy to Europe will benefit any NA energy producer. Yield is 5.38%.
Unless there's a big recession that reduces demand, doesn't see oil getting too far below $60 (which is where it makes money). A lot of the US producers can't make $$ much below $60, so that provides a floor. So he's not too worried about the price of oil.
Best-run company in Calgary since about 1990. Slow and steady wins the race, they don't make mistakes. The name to own when energy does well. Right now the energy market's tough, but will get better slowly over time. Nice dividend, which increases every year. You could start accumulating. Solid play.
A core Canadian energy name, along with SU. Still, energy space has been very tough. Prices have been low, OPEC producing more than expected. Regulatory environment in Canada is challenged, as is the macro global economy. Great yield of 5.66% and should remain steady. Technicals don't look great. 200-day MA falling, and price is below.
He thinks crude oil will come back up. CNQ has an excellent management team and a diversity of production assets along with a huge portfolio of assets. Production is good and Capex is under control. It is at a compelling valuation and has the lowest cost and longest reserve of similar companies in Canada. It offers great downside protection. It can sustain its dividend and last year returned $7.1 billion to investors which should be repeated this year. It also got rid of $2 billion in debt. Buy 16 Hold 6 Sell 0
(Analysts’ price target is $52.38)In Q2-2025, the company generated an adjusted EPS of $0.71, compared to last year’s $0.88; the decline was largely due to weak commodity prices. However, CNQ managed to beat expectations of around $0.63. CNQ also returned around $1.6B to shareholders during the quarter ($1.2B in dividends and $0.4B in share repurchase). CNQ's business continues to remain robust and sustainable, and management believes the company can achieve breakeven in the low to mid-US$40 per barrel range, at which level CNQ could generate enough funds to cover maintenance capex and dividends. CNQ’s management is committed to continuing with its shareholder-friendly policy while maintaining a healthy balance sheet. Though there is some volatility in financial results due to the fluctuation of commodity prices, but we think CNQ continues to be a high-quality cash cow with attractive dividend growth prospects over time.
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Should do well. Consistently compounds capital for investors. Way more shareholder friendly with buybacks, dividend increases, and debt paydown. Valuation still quite reasonable, given what it is.
As inflation expectations go up and down, investors are positioning their portfolios for one or the other. On the deceleration trade, people are selling materials and energy stocks. A bit of a headwind between quarters, as the trade becomes more macro-focused. Keep holding. It's all just noise and volatility.
The numbers are phenomenal, and should be for next few years. You'll see the highs once again as things settle between the different strategies that investors are deploying.