© Reuters. Canadian Natural Resources: It’s about Market TimingCanadian Natural Resources (NYSE 🙂 is one the most important and prolific producers of natural resources in the world.
The stock is a good investment. TipRanks shows Canadian Natural stock charts.
Why now?
It’s really two-fold. First off all, we’re in an environment where energy prices are surging, Canadian Crude is trading more than twice above the company’s breakeven ($30-31), and Natural Gas is also trading at nearly five times the company’s breakeven.
Suppliers and producers of commodities will often allocate capital to lower commodity prices and make more when they are high. This results in a substantial increase in net income and balance sheet equity, which is likely to be distributed to shareholders.
The second argument is bullish. Investors are heading into an environment with potentially higher interest rates. This is why they prefer dividend-paying stocks over pure growth stocks. These stocks will likely be subject to higher financing costs which could lead to slower income line growth.
Three sectors are most likely to benefit from higher interest rates (predicted for 2022), and that are energy, finance, or healthcare.
Canadian Natural, one of the best dividend-paying stocks in energy, is poised for a significant capital influx.
The Key Metrics
This stock has a great value proposition. Canadian Natural’s forward P/E ratio is trading 24.8% below its sector, its forward price-to-book 10.6% below, and forward EV/EBITDA 37.5% below.
The producer has also managed to reduce its cost of capital by 17% since 2018, and it has a solid interest coverage ratio of 4.9. Investors are assured good value and both of these factors help ensure they get a great return on their investment.
The stock has a forward dividend yield of 4.2%, which understates its potential because of its remaining capacity.
Canadian Natural’s current payout ratio is 28.2% below its five-year average, its dividend coverage is 35.4% better off than its sector, and finally, its cash from operations is 30.6% higher than its historical average.
Wall Street Take
Wall Street considers Canadian Natural a strong buy, with 11 Buys and one Hold over the past three-months.
Canadian Natural’s average price target of $44.07 suggests a 15.6% upside potential over the next 12-months.
Last Word
Canadian Natural Resources looks intriguing at the moment. Due to high commodity prices, the company doesn’t invest much at the moment. Instead it distributes profits to shareholders.
Disclosure: Steve Gray Booyens had no position in the securities listed in this article at the time it was published.
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