Wednesday, September 19, 2012

Canadian Natural Resources

On my other blog I am today writing about Conrad Black...continue...

I do not own this stock of Canadian Natural Resources (TSX-CNQ). This is a stock on a number of dividend lists as it has a good record of dividend increases. It raises the dividend each year and over the past 5 and 10 years the growth in dividend is 19% and 21.5% per year.

The dividends may increase quickly, but the dividend yield is quite low. The 5 year median dividend yield is 0.73%. The 10 year median dividend yield is 0.75%. The current dividend yield is 1.31%. The dividend yield in the past has been to 1.33%, but not higher. The 10 year median dividend high is 1.08%.

The Dividend Payout Ratios are very low with the 5 year DPR for earnings at 14% and the 5 year DPR for cash flow at 3.92%. The DPRs for 2012 are expected to be 24% for earnings and 8% for cash flow.

This is an oil and gas exploration company and therefore its profits are tied to the price of oil and gas. However, it is done well for its shareholders over the past 5 and 10 years. The total returns over the past 5 and 10 years are 4.91% and 24.31%. The portion of this return from dividend would be 0.72% and 1.25% per year, respectively. The capital gain portion of this total return is 4.19% and 23.06% per year, respectively. The portion of the return that is from dividend is 14.73% and 5.14% over the past 5 and 10 years.

This is an oil and gas company that does not have a fluctuating dividend depending on the price of oil and gas, but rather increases the dividends as they can. They pay out a very low portion of their income and cash flow. What this means is that after 10 or 15 years you could be earnings a very good return on your initial investment.

Because the dividend yield is currently relatively high for this stock, you could, after 10 years be earnings 7.5% on your purchase price of the stock today. After 15 years, you could be 12% return on your purchase price of the stock today.

Over the past 5 and 10 years the number of shares outstanding has increased slightly by 0.38% and 1.24% per year. They have been buying back shares and have also issued shares under stock options.

Revenues over the past 5 and 10 years have grown at the rate of 5.9% and 15.8% per year, respectively. The Revenue per Share has grown at the rate of 5.5% and 14.5% per year. (There is a difference because of the increase in outstanding shares over the past 5 and 10 years.)

The cash flow per share has grown at the rate of 4.9% and 11.1% per year over the past 5 and 10 years. The book value per share has grown at the rate of 16% and 18% per year.

The Return on Equity is in the good 10 to 15% range at11.5% per year the financial year of 2011. The 5 year median ROE is also 11.5% per year. The ROE based on comprehensive income is also good for 2011 with a rate of 11.6%. However, the 5 year median ROE based on comprehensive income is also 11.6%.

The current Liquidity Ratio is just 0.55. This means that the current assets cannot cover the current liabilities. However, this company has a strong cash flow and if you include cash flow after dividends, the ratio for the end of 2011 was 2.14. The 5 year median ratio including cash flow after dividends is 2.58.

The current Debt Ratio is quite good at 2.01. The 5 year median is 1.68. The current Leverage and Debt/Equity Ratios are fine at 1.99 and 0.99. These have 10 year median ratios of 2.48 and 1.48.

This is considered to be a core stock for a number of investors and for good reasons. It may have low dividend, but the dividend increases are very good. You would buy it for diversification.

It would also be a good stock for someone just starting to invest. Resource stocks are riskier stock, but the young can take the risk as they have a long time for investing and realizing a good return no matter what the current economic climate is like. Also, the initial low dividends mean low taxes if you are employed. After a long while, it will produce great income on your initial investment.

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 Canadian 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.


  1. What the you think of the recent oil well services stock that are paying high dividends? HWO.TO, CWC.V All over 6 percent divi and very low Price to earnings. Whether or not they are sustainable I am not sure, but the oil prices won't be going down as the Middle East crisis magnifies.

  2. I just bought some CNQ today. It is a good price if you look at dividend yield. Good company at a good price.

    The thing to do is buy good companies when they are out of favour.

    I do not follow either of the oil well services stock you mentioned so I cannot comment on them. However, sometime oil services companies do better for you than the oil companies they service.