Where Will CNQ Stock Be in 3 Years?

Canadian Natural Resources (TSX:CNQ) has long been a strong investment. The energy stock consistently combined disciplined capital spending with some of the highest-quality, longest-life energy assets in the world, giving it reliable cash flow through both good and bad oil cycles. Its low operating costs let it stay profitable even when crude prices were weak, and when prices were strong, CNQ used the windfall to raise dividends, buy back shares, and strengthen its balance sheet. And that was great in the past, but what does the next three years hold for CNQ stock?

A strong base

CNQ stock enters the next three years from a position of unusual strength. That’s largely because the last three years transformed it from a reliable energy name into one of the most efficient cash-generating machines on the entire TSX. Between 2021 and 2024, CNQ benefited from strong oil prices, but it wasn’t the price of crude alone that lifted the stock; it was how the company used that environment.

CNQ stock pushed its net debt down aggressively, expanded production without overspending, and returned more cash to shareholders than at any point in its history. Its dividend grew at double-digit rates, buybacks accelerated, and the balance sheet became one of the cleanest in North America. Now, the next three years don’t depend on oil staying at booming levels. CNQ stock can remain profitable, cash-rich, and shareholder-focused even if prices cool.

Future focus

Looking ahead, CNQ stock is positioned to keep compounding because of the structure of its asset base. The company owns long-life, low-decline oil sands operations that have extremely predictable production profiles and some of the lowest operating costs in the industry. Over the next three years, these assets should continue generating huge free cash flow, even if global oil prices fluctuate.

Management has already signalled that with debt now below its targeted threshold, more cash will shift to investors through higher base dividends and further special dividends or buybacks. CNQ should maintain its pattern from the last three years, where dividends rose sharply, and buybacks reduced share count. Thus, investors should expect the next stretch to be equally rewarding. This is especially true because the company’s breakeven levels are so low that free cash flow remains strong across most plausible price scenarios.

More to come

There are also multi-year catalysts lining up. CNQ stock plans modest but steady production growth as efficiency improvements roll out across its oil sands and thermal projects. It’s investing in carbon capture and emissions-reduction technology, not from a marketing standpoint but because it lowers long-term costs and regulatory risk. Global crude markets are also shifting in CNQ’s favour. Underinvestment in supply worldwide has created a structural tightness that supports oil prices better than in past cycles. Over a three-year window, that means CNQ likely continues operating in a supportive pricing environment while competitors struggle to bring on new production.

That said, there are risks investors should keep in mind. A sharp global recession could pressure oil demand, and governments may increase environmental obligations on producers. But CNQ stock’s recent history shows it can absorb those shocks better than most. Its cost advantages and fortress balance sheet give it a buffer that few energy companies enjoy. If CNQ simply maintains the playbook of the last three years, it doesn’t need perfect conditions to reward shareholders. It just needs stability.

Bottom line

Put it all together, and the next three years for CNQ stock likely look like a continuation of its recent evolution. That leaves today with an ample opportunity to bring in dividends. In fact, here’s what $7,000 could bring in today.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTCNQ$46.84149$2.35$350.15Quarterly$6,981.16

If the last three years were about strengthening the foundation, the next three are set up to be about harvesting that strength. The company is no longer just cyclical; it’s becoming a long-term compounder disguised as an energy stock.

The post Where Will CNQ Stock Be in 3 Years? appeared first on The Motley Fool Canada.

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More reading

• 3 TSX Stocks to Buy Today and Hold for Decades
• Got $1,000? 5 Top Canadian Stocks to Buy and Hold
• The 3 Canadian Energy Companies Holding Strong Even as Oil Prices Fall
• Baby Boomers: These Are the Top Stocks That’ll Keep Paying You in Retirement
• Best Stock to Buy Right Now: Canadian Natural Resources vs. Suncor

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.