Then and Now – Canadian Natural Resources (CNQ)
Welcome to another Then and Now article, a continuation of my series where I revisit some older blogposts and either rip them to shreds (because my thinking has totally changed on such subjects) or I’ll confirm my position on various personal finance topics or some specific stock and ETF investments.
Today’s post is about a dividend favourite with many DIY investors in Canada: Canadian Natural Resources (CNQ).
You can read a few previous Then and Now posts on certain stocks (good and bad!) at the end of this post.
Then and Now – Canadian Natural Resources (CNQ)
I started writing about owning CNQ back in 2012.
At that time, I was ramping up my DIY stock portfolio.
I owned a few Canadian banks at the time along with a couple of U.S. stocks but I was looking to diversify further…
Coming out of the Great Financial Crisis (GFC) I figured it was prudent to not only pay down our mortgage debt (while borrowing costs were low) but also keep investing at the same time.
I/we had a financial plan, then, for what I thought would be some prolonged low interest rates. From 2012:
“I’m no financial guru but I see this prolonged low interest rate environment as a short-term blessing to solidify my financial plan.
Pay down debt and make steady investment contributions. A simple two-step dance that is bound to help us realize our 7-figure portfolio dreams (without debt) in the coming years.”
Then
Just before writing that post, I initiated my position in CNQ. CNQ was held to diversify away from Canadian banks at the time. I also felt we needed to add more energy assets to our portfolio beyond my very first stock: Enbridge purchased a few years earlier.
For some partial validation, CNQ made this list of top-performing stocks from 2013.
Again, I figured CNQ would be a great addition to the portfolio given they were expanding beyond Canada (across North America) and were growing operations in the U.K. North Sea, and Africa.
They had also demonstrated their ability to pay growing dividends. 🙂
Source: https://www.cnrl.com/investors/dividends/
Now
CNQ has been in growth-mode for some time.
With the pandemic to be (eventually) declared over, I collaborated with the guys at Stocktrades.ca on this post that included CNQ as a top-pick for some potential post-pandemic results.
Based on any recent purchases over the last few years, shareholders like myself have been rather happy.
Investors who have owned CNQ stock before, during and after the pandemic have benefitted from the company’s recent massive dividend hikes, including a 28% special raise in 2022. In 2022, CNQ actually increased dividends twice by 45% as oil prices surged to multi-year highs.
Canadian Natural’s growing and sustainable dividend is a testament to its operational stability.
I actually bought more CNQ in 2022.
This spring, 2023, CNQ reported a free cash flow of $1.4 billion (after dividends).
The company shared in a release:
“With ample liquidity on our balance sheet, we can add production with minimal capital while generating significant returns on capital and maximizing shareholder value.”
Love it.
And it could get better later this year for all CNQ shareholders…
Canadian Natural Resources aims to distribute 100% of free cash flow once its net debt reaches below $10 billion. It ended 2022 with a net debt of $10.5 billion.
CNQ’s long-life assets with its ability to generate sustainable cash flows make it a mainstay in our portfolio.
In the chart below, I’ve compared CNQ returns to one of my favourite low-cost ETFs: XIU since 2012.
Source: Portfolio Visualizer
Along with the other stocks I own in our portfolio, in other sectors, I continue to believe our basket of Canadian stocks, with some U.S. stocks, and then indexed ETFs should deliver a nice mix of growing income and capital gains over time.
You can always check out a few stocks and ETFs we own in the dedicated pages below and why:
Then and Now – Canadian Natural Resources (CNQ) Summary
While some might argue our pipeline stocks could be in trouble…more reading below…CNQ continues to generate LOTS of free cash flow that should continue to reward shareholders as oil prices stay modest/where they are or climb even higher.
This is a good time to remind you that because ALL individual stocks have investing risk and introduce portfolio risk, if you do decide to become a DIY investor and own individual stocks as part of your process, then consider my “5% rule”. That means I try to keep any one stock in our portfolio to about 5% of our portfolio value (or less) – although I am fine if my ETF holdings go beyond 5% of my overall portfolio value over time thanks to the diversification benefits they provide. In fact, they likely will…
With some big-time investors shorting the U.S. stock market of late and famous billionaires hoarding more cash in their portfolios (i.e., Warren Buffett), there is talk of a much anticipated market crash this fall given only a handful of U.S. stocks are even driving market returns.
“Michael Burry made a name for himself by shorting the market to the point where they made a movie about him called “The Big Short.” But is he preparing for a time when lightning will strike twice? Recent moves in his portfolio suggest as much and in a very big way. The news began, as news seems to these days, on Twitter. Michael Burry Stock Tracker noted a major move in Michael Burry’s Scion Asset Management portfolio, as he bought a massive quantity of put options in two major market-tracking funds: the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ).”
Source: https://www.tipranks.com/news/the-big-short-redux-michael-burry-shorts-market-big
And…
“Warren Buffett’s company reported that it now sits on $130.6 billion in cash from $128 billion in the fourth quarter of 2022, according to Edward Jones, citing Berkshire Hathaway company data. This announcement left investors wondering where Buffett might deploy his stockpile.”
Source: https://ca.style.yahoo.com/warren-buffett-130-billion-cash-163151316.html
I will continue to own a bit of CNQ along with my other companies, and ETFs, and some cash too (!) and simply see what happens.
Selected Then and Now posts and stock ownership:
As promised above, you can see some of the stocks I’ve been buying and holding, or not (!), over the decades below. I welcome your thoughts and feedback on any of these stock selections and holding periods – happy to discuss anytime!
I own a bit of BlackRock (BLK) stock in my portfolio and have done so for many years.
I posted my update with TD Bank (TD) here after more than a decade of stock ownership.
This was my update about owning Telus (T).
I enjoy owning low-volatility, higher growth stocks like Waste Connections (WCN).
I’ve owned Canadian National Railway (CNR) since 2016.
This is my 10-year+ ownership in Procter & Gamble (PG).
But not every purchase is a good one! Read on…
H&R REIT – and why I no longer own it actually!
Disclosure: None of these stocks, including CNQ, are recommendations for purchase. You are responsible for your investment decisions.
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Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
Am also a holder of CNQ and have enjoyed the company returning FCF in the form of buybacks and dividends. Many believe the death of fossil fuels is imminent. I think it is inevitable but will not occur at the pace many believe. The company has an abundant supply, is a low cost producer and I see no reason to sell unless they change their plan of eliminating debt and buying back shares. I have a full position at around 4% so see no need to add anytime soon. Thanks for the then and now feature on CNQ, Mark. Happy investing!
I agree Londoncalling. While oil and gas will be phased out, I believe this will be a multi-generational timeline shift.
I intend to own and DRIP a bit of CNQ for the coming years but I will keep readership posted on my portfolio changes over time and why!
Happy investing to you 🙂
Mark
Hi Mark, I bought most of my CNQ during the COVID crash in March of 2020. I think my average purchase price would be around $18 dollars. Now I’m thinking i should sell some while it is doing well, but I hesitate due to all the talk about future dividend increases once they get debt below 10 billion. I was also hoping to see another special dividend, but looks like that won’t be happening this year. It is very tempting to sell a portion and buy TD, which would maintain my dividend income, and potentially grow share value higher once interest rates start to fall. TD also has decent dividend growth and is a wide moat company. I know you can’t give advice, just wondering if anyone else is thinking the same way.
Hey Howard, as per my posts below, I am in the midst of transitioning from a growth to income portfolio so have many stocks with good capital gains that I do not intend to be a part of my income portfolio long-term and thus need to sell. If you think CNQ still has some good potential for capital appreciation but realizing TD (like other interest sensitive stocks) may be relatively inexpensive at this time and a long-term dividend paying stock to hold, you could play it both ways by selling half of CNQ and use the proceeds to purchase TD.
I have done this with a few of my still “promising” stocks…although probably it is as much because I am finding it a challenge at times of converting my thinking from capital appreciation to full on income investing. LOL.
Hi Mark,
I admit to making mistakes.
I bought shares in Canadian Natural Resources in May 2015 and sold in December of that year.
Then again, aside from the pipelines the rest of the energy sector seemed to be crumbling that year. As well as CNQ, starting in 2013 I also sold out of other companies that turned out to be dogs, like Talisman Energy, Waterfurnace Renewable Energy, Ensign Energy Services, Akita Drilling, and Canadian Energy Services & Technology.
All looked good, with increasing dividends, until the storm hit.
I didn’t sell any of the pipelines though, except for IPL which got sold in 2020 after it cut the dividend.
Mistakes are made, we do get the occasional dividend cut, but most years our income from dividends received has gone up faster than inflation which is all I care about.
We own 32 companies in seven sectors. All Canadian and all pay a dividend in the taxable account.
Thanks for sharing. Yes, we’re close to the same, 30-some Canadian stocks and a few U.S. ones as well.
I hope to share my August 2023 dividend income update in a few weeks, should be higher since CPX increased their dividends a few weeks back.
Mark
We all make mistakes we regret and the odd dividend cut is inevitable, but the important thing is you are, in the grand scheme of things, achieving your main goal (which recently has become similar to mine) of growing your income at or exceeding the pace of inflation.
CONGRATULATIONS!!
Hi Paul,
As Rob Carrick says in the first sentence of his Globeinvestor article on August 18th “Want to grow your retirement income every year? Dividend growth stocks like these deliver.”
“Owning dividend growth stocks in retirement is like having an employer who offers generous wage increases every year.”
—————————————-
I’ll go along with that.
Yup. I hope to stick with my plan since overall, with bias to dividend growth stocks, we are meeting our investing / portfolio income objectives. I sprinkle-in low-cost ETFs for extra diversification and that’s working too.
Mark
Sssssshh! let people buy Midocre ENB and TRP sluggish companies that don’t go anywhere
We’ll see what the next market crash brings!
Lol. I guess it all depends on your perspective and goals. Purchased ENB in early 2005 during my accumulation years and it is up 440% compared to TSX’s 120%. If I had DRIP’ed it this whole time it’d be up over 600%. And now that I invest primarily for income, I am more than happy to continue owning and invest more in ENB.
That’s impressive, Paul! I’ve owned ENB since 2008. I have no intention of stopping my DRIP with ENB either. 🙂
Any investing goals for 2023?
Mark
I am a recent retiree and discoverer/adopter of growth dividend investing (after looking for a relatively low risk, low maintenance way of investing for reasonable level of income that would keep up with, or even better exceed, inflation). My investment goal for this year is to lay-off my financial advisor of the last 15 years (did that 3 months ago) and begin the (likely 2-3 year) shift from a growth focused portfolio to an income portfolio and in the process increase my annual dividends for 2023 by at least 50% from 2022. As of today, my estimated dividends for 2023 will be 55% greater than last year and forward looking annual dividends are estimated to exceed 2022 by 105%.
So far so good! Time will tell about the keeping up with inflation part.