Is Canadian Natural Resources Limited (CNQ) the Best Canadian Dividend Stock to Buy For Income Investors?

Canadian Natural Resources Limited (CNQ) has long been a favorite among income-oriented investors, thanks to its consistent dividend growth and attractive yield. But is it the best Canadian dividend stock to buy for income investors in 2025? Let's examine the key financial metrics and compare CNQ to its peers to determine if it lives up to its reputation.



Dividend Yield and Growth

CNQ's current dividend yield is 4.83%, which is well above the average dividend yield of other dividend-paying stocks. This indicates that CNQ is paying out a significant portion of its earnings as dividends to shareholders. Additionally, CNQ has a strong track record of dividend growth, with a 10-year average dividend growth rate of 6.5%. This demonstrates the company's commitment to increasing shareholder returns over time.

Payout Ratio and Earnings Coverage

CNQ has a payout ratio of 58%, which is relatively low compared to other dividend stocks. This indicates that the company is not overpaying its dividends and has room to continue increasing its dividend payments in the future. Additionally, CNQ's dividend is well-covered by earnings, with a payout ratio of 58% and a dividend yield of 4.83%. This suggests that the company has a stable earnings base to support its dividend payments.

Consistent Dividend Payments

CNQ has a long history of consistent dividend payments, with a 25-year track record of consecutive dividend increases. This demonstrates the company's commitment to maintaining and growing its dividend payments over time.



Comparison to Peers

CNQ's dividend growth rate is 6.5% annually, which is higher than the average dividend growth rate of its peers in the energy sector. For instance, the average dividend growth rate for the S&P 500 Energy sector is around 4.5% annually. Additionally, CNQ's dividend growth rate is higher than that of its Canadian peers such as Suncor Energy (SU) with a dividend growth rate of 4.4% and Canadian Tire (CTC.A) with a dividend growth rate of 4.6%. This indicates that CNQ has a strong track record of increasing its dividend payments to shareholders over time, which is a positive sign for income-oriented investors.

Risks and Challenges

While CNQ is an attractive dividend stock, it is not without risks and challenges. The energy sector is cyclical, and CNQ's dividend payments could be affected by fluctuations in oil prices and production levels. Additionally, CNQ's high dividend yield may be a sign of higher risk, as the company may be paying out more of its earnings as dividends compared to other stocks with lower yields.

Conclusion

Based on its high dividend yield, strong dividend growth rate, low payout ratio, and consistent dividend payments, Canadian Natural Resources Limited (CNQ) is an attractive dividend stock for income-oriented investors. However, investors should be aware of the risks and challenges associated with the energy sector and consider diversifying their portfolios to mitigate these risks. Ultimately, CNQ's strong financial performance and commitment to shareholder returns make it a compelling choice for income investors seeking a stable and growing income stream.