No GO for Canadian Natural Resources

CNQ

Canadian Natural Resources (TSE:CNQ) is an energy company operating in the crude oil and natural gas sectors. They have operations in North America, the North Sea and on the coast of Africa. The company is quite large for a Canadian company but relatively small when compared to many multi-national oil & gas corporations.

Pricing on natural gas and oil is really affecting them and there appears to be a lack of consensus by analysts as well. Stock Chase will show you what many analysts have to say and for CNQ, it varies from Top Pick to Don’t Buy.

CNQ Quick Facts

  • Stock Ticker: TSE:CNQNYSE:CNQ
  • Market Cap.: 29.84B$
  • P/E: 12.65
  • Forward P/E: 10.27
  • P/B: 1.25 (Price to Book)
  • P/S: 1.78 (Price to Sale)
  • P/CF: 4.34 (Price to Cash Flow)
  • EPS: $2.16
  • Beta: 1.95
  • Liabilities to Equity Ratio: 0.99
  • Quarterly Dividends: $0.105
  • Dividend Yield: 1.47%
  • Dividend Payout Ratio: 14.94%
  • ROE: 12.04%
  • 10 Year EPS Growth Average: 13.27%
  • 10 Year Dividend Growth Average: 21.71%
  • 52-Week Low: $25.01
  • 52-Week High: $41.38
  • 52-Week Range: 13.74%

CNQ Dividend Growth

In CNQ, we have another candidate for the 10/10 rule not to mention 3 stock splits in the last 10 years.

CNQ Dividend Growth

The average over the past 10 years has been 21.71%. The history of dividends doesn’t go too far back but it has a steady 10 years of paying and growing dividends. Quite short to have established a long-term behavior but good enough to pay attention.

YearDividendsGrowthStock PriceSharesDividendsNew SharesValue
2000$0.00
2001$0.05
2002$0.0620.00%$5.81860$51.609$4,993.16
2003$0.0833.33%$8.17869$69.519$7,099.68
2004$0.1025.00%$12.61877$87.747$11,065.70
2005$0.1220.00%$29.70884$106.124$26,260.81
2006$0.1525.00%$29.84888$133.194$26,495.68
2007$0.1713.33%$35.44892$151.714$31,626.24
2008$0.2017.65%$24.38897$179.337$21,856.31
2009$0.215.00%$35.67904$189.855$32,242.10
2010$0.3042.86%$42.77909$272.806$38,892.87
2011$0.3620.00%$37.48916$329.669$34,321.48
2012$0.4216.67%$27.94925$388.3014$25,831.18
10 year average$0.2521.71%

I have also attempted to show an approximation of what $5,000 invested 10 years ago would have generated the following dividends today. You would have reached a high of nearly $40K at some point. Below compares an approximation of what CNQ would have done compared with the markets – not bad I guess.

CNQ Value vs Market

CNQ Dividend Payout Ratio

CNQ is providing investors with a very safe payout ratio. I expect CNQ’s dividend to be safe considering their low ratio even amid the challenging oil pricing that Canada may face in the future. It’s too soon to tell if they will opt to stop the dividend increase to avoid increasing their payout ratio.

CNQ Dividend Payout Ratio

 

CNQ EPS Growth

Nothing stellar on the EPS front. It’s slow and steady and hopefully it will recover with a stabilization in the economy and better oil and gas pricing. It’s almost conflicting to say that as I don’t really want to pay more at the pump and I don’t need higher natural gas bills either.

CNQ EPS Growth

Competition

Depending on the focus of the competitors, there can be competitors on the oil or gas sectors. For example, Encana used to operate in both sectors but is has since split to create Cenovus to focus on their oil business. Considering CNQ operates in both sectors, I decided to put all the energy players I track.

I wasn’t sure how to sort them initially and opted to sort them by the dividend payout ratio which is highlighting and interesting fact – all dividend aristocrats show up at the top for both the U.S. and Canada.

TickerCompanyQuoteP/EEPSMarket Cap ($B)DividendYieldPayout Ratio
IMO.TO* Imperial Oil$43.4510.02$4.3436.85$0.100.92%9.22%
SU.TO* Suncor$33.4510.95$3.0551.22$0.101.20%13.11%
CNQ.TO* Canadian National Resources$27.9412.96$2.1630.58$0.111.50%19.44%
XOM** Exxon Mobile Corp$89.099.41$9.47406.19$0.572.56%24.08%
CVX** Chevron$105.478.65$12.19206.42$0.903.41%29.53%
CVE.TOCenovus Energy$33.4218.39$1.8225.26$0.222.63%48.35%
HSE.TOHusky$27.3613.74$1.9926.87$0.304.39%60.30%
COS.TOCanadian Oil Sand$20.6210.08$2.059.99$0.356.79%68.29%
IPL.UNInter Pipeline$22.7520.63$1.106.22$0.084.22%87.27%
PPL.TOPembina Pipeline$28.1030.6$0.928.11$0.135.55%169.57%
VET.TOVermillion Energy$48.9047.61$1.034.83$0.194.66%221.36%
KMPKinder Morgan Energy$81.5152.63$1.5529.75$1.115.45%286.45%
CPG.TOCrescent Point Energy$39.0567.24$0.5813.67$0.237.07%475.86%
ARX.TOArc Resources$24.571138.55$0.027.55$0.104.88%6000.00%
ERF.TOEnerplus Corp$12.95#N/A-$1.642.57$0.1816.68%-131.71%
ECA.TOEncana$21.42#N/A-$4.0115.77$0.203.73%-19.95%

Thoughts

I have been following CNQ for quite a while now and I have used it in my annual Stock Picking Contest as well as in the Dividend Growth Index project but it has failed to produce the expected returns. The natural gas prices have been hurting this company for a while now. From a technical indicator point of view, the company is a value play. From a stock growth, who knows when natural gas prices will recover and it’s not a quick process for a company to change their gas and oil exposure if that’s what they need to do. Management appears to be sound and the main question relies on the pricing of oil and gas.

From a dividend growth perspective, CNQ is a dividend aristocrat and a dividend achiever as it adheres to the 10-10 rule for growing dividends by 10% on average for 10 consecutive years.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.