Monday, August 9, 2010

Canadian Natural Resources

This is a stock (TSX-CNQ) I follow, but do not own. It is a resource stock that pays dividends. However, this one is different from most resource stocks that pay dividends. The dividends paid do not fluctuate with the price of the underlying commodity. The dividend on this stock is at a very low yield and they have raised their dividends on a consistent basis.

The growth figures on this stock are mostly very good, but it is obvious that 2009 was not a good year for this stock. The growth for dividends, my favorite subject, is good with the 5 and 10 year growth rates being at 16% and 19.7% per year, respectively. The worse growth figures are for earnings and the 5 and 10 year growth rates are 2.4% and 19.7% per year respectively. The reason for the low growth over the last 5 years is that the earnings decreased between 2008 and 2009 by about 70%.

One of the best growth rates occurred for total return. The growth for total return over the last 5 and 10 years are around 25% per year for each period. However, most of the return is in stock price appreciation, as dividends barely add 1% to the total return. So, if you are looking to buy a stock for dividends, this is probably not one you would consider.

When you look at the Liquidity Ratio, this is consistently a low ratio; however, the Asset/Liability Ratio is always quite high. At the end of 2009, the A/L Ratio was 1.90 where anything over 1.50 is good. Another ratio that is usually quite good is the Return on Equity. The ROE for 2009 was lower than usual at just 8.1%, but the 5 year average was still 18%. Also, the ROE for the 1st quarter is also good at 17%. The Accrual Ratio is unremarkable at 2.6%, with a cash flow from operations higher than the net income, which is what you would want to see.

This stock is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices) as they consistently increase their dividends. However, as I stated before, the yield is so low that it barely affects the total return for this stock. I feel that this stock is a good one, but one I will probably not buy because of the low dividends. I will continue to follow it as it is on the dividend achievers type lists.

Canadian Natural Resources Ltd. is a senior oil and natural gas exploration, development and production company. The Company's operations are focused in Western Canada, in the U.K. sector of the North Sea and in offshore West Africa. Its web site is here CDN Natural Resources. See my spreadsheet at cnq.htm

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

No comments:

Post a Comment