When you build a house, safety takes priority. The price, the aesthetics, and the trend are all secondary. Similarly, you want your nest egg portfolio to have the most trusted, low-risk, and predictable investments on which you can fall back when things go tough. Stocks are riskier than fixed income, but even in stocks, there are low-risk business models that give returns to shareholders through dividends.
The top Canadian dividend stock I’d trust for my nest egg
In a volatile market where falling revenues and rising costs are making debt a burden, few dividend giants stand to win. The market trend is skewed towards energy, mostly liquefied natural gas. Many cars, homes, equipment, and power generation plants are using natural gas as their primary fuel because it is affordable and causes less pollution than petrol and diesel.
The shifting energy supply chain and the push towards less pollution could make natural gas a winner. Canadian Natural Resources (TSX: CNQ) has the world’s second-largest oil sands reserves. Its impeccable financial discipline and demand shift towards natural gas make me trust this stock to pay dividends in good and bad times.
Three reasons why I trust this Canadian stock
1. Fights inflation
Firstly, the need for a dividend is felt more when inflation eats up your paycheck. Having a source of passive income helps. Canadian Natural Resources grows its dividends significantly in an inflationary environment.
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The primary cause of most inflation is rising oil and gas prices. When energy prices stay elevated for a longer period, they start affecting a nation’s inflation numbers as logistics become costly. Higher oil and gas prices bring surplus cash to Canadian Natural Resources, which it uses to boost production, repay debt, pay dividends, and buy back stocks.
2. Sustains dividend growth
Secondly, its dividend growth is sustainable without any dividend cuts. In 25 years, it has increased its dividend per share from $0.025 in 2001 to $2.5 in 2026.
Canadian Natural Resources can sustain dividends because it incorporates the dividend cost into its breakeven price of mid-$40s. It reduces production costs because of low maintenance, high output reserves, and technological upgrades. It reduces its share count by using 75-100% of free cash flow to buy back shares. With low production costs and a reduced number of shares, Canadian Natural Resources can pay a higher dividend per share from the same amount of cash, making its dividend growth sustainable.
3. Manages energy price volatility
The biggest risk with energy stocks is their vulnerability to oil and gas prices. Canadian Natural Resources has diversified its energy products to include synthetic crude and liquefied natural gas (LNG), which commands a higher price. So, when Western Texas Intermediate (WTI) crude price falls, Canadian Natural Resources increases the mix of Synthetic crude. It is among the few companies that sell both oil and gas and will benefit from the energy transition.
This dividend stock is set to benefit from geopolitical tensions
Canadian Natural Resources will benefit from the upcoming move by the government to expand Canada’s export markets to non-United States countries. The global shift in the energy supply chain has opened doors for Asia and Europe as potential markets for Canada’s oil and gas. Canada is building export infrastructure with Canada LNG and Woodfibre LNG, giving Western Canadian natural gas producers new markets to sell their product at better prices. This could help CNQ continue its dividend growth for the next two decades.