An Energy Stock Yielding 4% That Could Have a Breakout Year Ahead

Geopolitical tensions are escalating, and at the centre is oil and natural gas. Energy stocks are riding on the geopolitical premium as the US, Israel- Iran war creates a supply shock in the Gulf region. The war among oil-rich nations has created the need for oil importers, like Europe, China, and India, to look for alternative sources. Canadian Prime Minister Mark Carney’s visit to these nations opens up new export markets for Canadian energy, which relied heavily on the United States until last year.

Why Canadian Natural Resources is the energy stock to watch in 2026

Canadian Natural Resources (TSX:CNQ) is well-placed to benefit from the Canadian government’s initiative to diversify energy exports. The government is expediting energy infrastructure to directly export liquified natural gas (LNG) from Canada.  Canadian Natural Resources has been on an acquisition spree, acquiring reserves from Tourmaline Oil and other companies. In 2025, it increased its total proved reserves by 4% to 15.9 billion barrels of oil equivalent (BOE), of which 73% is long-life, low-decline.

Owning the largest oil sands reserves in Canada and having a cost advantage gives Canadian Natural Resources an edge to have a breakout year ahead amidst oil price shocks. The company has increased its 2026 production guidance. It will produce more oil, which will lead to higher revenue.

Moreover, the company has reduced its net debt from US$18.7 billion in 2024 to US$16 billion in 2025. It has repurchased shares worth $1.4 billion and reduced its 2026 operating capital forecast by $310 million. All this will improve its earnings and free cash flow, which will convert into higher dividends.

The company has increased its 2026 dividend per share by 6.4%, marking 26 years of dividend growth at a 20% compounded annual growth rate. This dividend growth could increase as the company uses 25% of its free cash flow to reduce net debt. The more debt it repays, the higher the free cash flow will go towards share buybacks.

A breakout year for Canadian Natural Resources

Share buybacks are a bit of a discouragement for dividend seekers, but they are a strategic move. These are volatile times, and committing to a higher dividend could stress its cash flows. At this time, Canadian Natural Resources needs liquidity to acquire more reserves, increase production, and be ready for both supply shocks and oversupply.  

Canadian Natural Resources saw its share price jump 34% so far this year. Such a sharp rally was last seen in February to April 2024. These rallies don’t last long as they are a reaction to energy shocks. Its share price could see some correction as oil supplies adjust to the US, Israel-Iran war.  

However, this could be the beginning of higher dividend growth rates as the company produces oil and natural gas from its newly acquired reserves in a world hungry for energy. The Venezuela crisis created a risk for Canada, as the former has the world’s largest untapped oil reserves. However, political uncertainty and the US influence on its decisions make Venezuela a risky partner. In times of war and uncertainty, Canada presents a reliable source of energy.    

Why invest in this energy stock now

1. Strong Reserves and Financial Stability: Canadian Natural Resources holds the largest oil sands reserves in Canada, providing a substantial strategic advantage during supply shocks.
2. Growing Dividend and Share Buybacks: A steady increase in the dividend per share and share repurchase programs offer investors a balanced return and growth proposition during uncertain times.
3. Strategic Global Expansion: The Canadian government’s support in diversifying energy exports taps into global demand shifts amidst geopolitical tensions.
4. Share Price Growth During Energy Shocks: The stock price could see growth cycles on geopolitical developments, allowing you to earn money during energy uncertainty.

What this energy stock can do for your investments

Investing in Canadian Natural Resources now could position your portfolio for significant returns in an energy-dependent future. Don’t let these opportunities slip by. Sign up for The Motley Fool’s newsletter to stay informed about energy stock insights.

The post An Energy Stock Yielding 4% That Could Have a Breakout Year Ahead appeared first on The Motley Fool Canada.

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* Returns as of February 17th, 2026

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Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources and Tourmaline Oil. The Motley Fool has a disclosure policy.