Canadian Natural Resources (TSE:CNQ) Is Increasing Its Dividend To CA$0.85

The board of Canadian Natural Resources Limited (TSE:CNQ) has announced that it will be paying its dividend of CA$0.85 on the 5th of January, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.2%, which is in line with the average for the industry.

View our latest analysis for Canadian Natural Resources

Canadian Natural Resources' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Canadian Natural Resources' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 24.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 65%, which is comfortable for the company to continue in the future.

Canadian Natural Resources Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was CA$0.42, compared to the most recent full-year payment of CA$3.40. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Canadian Natural Resources has seen EPS rising for the last five years, at 37% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Canadian Natural Resources' Dividend

Overall, a dividend increase is always good, and we think that Canadian Natural Resources is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Canadian Natural Resources you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.