Canadian Natural Resources 2

I own this stock of Canadian Natural Resources (TSX-CNQ, NYSE-CNQ). I bought this stock last year when the dividend yield was relatively high. I have not made much money as the stock is only up 1.32%. In quicken I have a 5.21% total return per year. (I bought it in September 2012.) Of the quicken return I have 4.55% from capital gain and 0.66% from dividends. I just bought more shares

When I look at insider trading, I find $9.3M of insider selling and $8.9M of net insider selling (with a minimal amount of insider buying.) Insiders seem to be selling off options. There are a lot of outstanding options for this company. As far as options are concerned, the company is not quite as bad as our banks, but it is getting there. There is also insider ownership.

The CEO has shares worth $69.4M and has options are worth $55M. The CFO has shares worth $24M and has options worth $22.6M. An officer has shares $8.3M and has options worth $4.6M. A director has shares worth $0.2M and has options worth $0.8M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 12.51, 19.28 and 23.53. The current P/E Ratio is 13.38 based on 2013 earnings of $2.43 and current stock price of $32.51. I get a Graham Price of $34.87. The 10 year low, median and high median Price/Graham Price Ratios are 0.87, 1.18 and 1.50. The current P/GP Ratio is 0.93. Both these tests say that the stock price is reasonable.

If you look at the Price/Book Value per Share ratios you get a different story. The 10 year median P/B Ratio is 2.00. The current P/B Ratio is 1.46. The current one is just 73% of the 10 year median ratio. This low current Ratio points to the stock being cheap. (A stock is cheap if the current P/E Ratio is 80% or less than the 10 year median ratio.)

The current dividend yield is 1.54% and the 5 year median dividend yield is 0.72%. The current yield is 113% higher than the 5 year median yield. This says the stock is cheap. (Also, the 10 year median dividend yield is 0.72% and the 10 year high median dividend yield is 1.06%.)

So, my stock testing says that the stock price runs from cheap to reasonable. The thing is that the test that show a reasonable price use estimates and the ones that show that the stock is cheap do not. A lot of dividend investors look to the dividend yield to tell them when to buy a dividend stock. Also, for the P/GP Ratio, a ratio of 0.93, on an absolute basis, says a company is cheap. (A ratio of 0.93 says that the stock price is lower than the Graham Price.)

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold. The vast majority of the recommendations are a Buy and the consensus recommendation would be a Buy. The 12 month consensus stock price target is $38.60. This implies that the total return would be 20.18% with 1.54 from dividends and 18.73% from capital gains.

There is an interesting article on this company in the Financial Post suggesting that stock of it and Suncor could surge next year. There is another take on this company at cnq.htm. It talks about estimating CNQ's fair value using discounted earnings plus equity model. (The problem with Seeking Alpha site is that they often do not allow you to go to the 2nd page if you are not a registered user.) You can also get a very nice overview of this stock from the Passive Income Earner blogger.

The reason I bought some of this stock is that it is a good company, it is a dividend growth stock and it is currently quite cheap, relatively. I am buying for the long term. I do not know or care if there will be much of an increase in the stock price by next year. It is good for my portfolio for the long term to buy good companies cheap. See my spreadsheet at cnq.htm.

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.

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 or StockTwits.