Long, multi-decade histories of consecutive dividend increases should be favoured by long-term investors who not only want a generous payout right off the bat, but also a dividend that can keep growing with them as they look to reach a comfortable retirement.
Indeed, Canadian Natural Resources (TSX: CNQ) is quite the force when it comes to dividend increases. The shares currently boast a relatively modest 4.3% dividend yield, thanks in part to an explosive rally that took the name to fresh all-time highs north of $76 per share in Friday’s session.
Not only is Canadian Natural Resources a premier dividend growth play to stash away for the long haul (maybe another 26 years), but it’s also a terrific way to hedge a U.S. tech-heavy portfolio (the S&P 500 is a very popular top holding among many Canadian investors), or geopolitical crises that drive up the price of oil.
CNQ is breaking out in a big way
With oil prices melting up at the end of last week, there’s real concern that energy-driven inflation could linger for a while longer. Indeed, just when you think that oil prices are coming back down to Earth, a sudden exogenous event could cause a reversal. And that’s why I think a large energy juggernaut, like Canadian Natural Resources, is a must as you collect the rich, growing dividends.
With the shares up close to 80% in the past year, it might feel like a bad time to chase the name. Still, I think the $157 billion juggernaut is cheap, with shares going for just 13.5 times trailing price-to-earnings (P/E). With explosive momentum back in the stock, I certainly wouldn’t be against the name, especially when you consider that the fundamentals are booming alongside the price of oil.
Indeed, I think it’s safe to say that more of the same is in the cards for the Canadian energy heavyweight, as it looks to extend its dividend growth streak to three decades in the coming years.
The king of returning cash back to shareholders
What’s more, as the firm’s free cash flow looks to swell, thanks in part to higher oil prices, investors could be looking at far more generous dividend increases than in the past. Indeed, the firm has what it takes to really spoil investors, especially as it looks to pursue buybacks and hikes with the stream of cash heading its way in a climate that probably couldn’t be more favourable. Indeed, returning 100% of the free cash flow back to investors could make CNQ quite a dividend growth icon.
As the firm becomes more generous while raising the bar on production, I think it’ll be tough to stop the name as it looks to extend its next leg higher. Of course, oil price moves are unpredictable, and that’s a major reason why CNQ stock could be a choppy mover.
The bottom line on CNQ
For the energy-light portfolios looking to hedge against continued escalations in the Middle East, though, I find CNQ stock to still possess one of the best risk/rewards out there today. I don’t like chasing stocks on breakout moments, but all considered, I do think the fundamentals support the latest jump.