Can a inventory with a 5.56% annual dividend yield provide you with $13,640 in yearly dividends? It will probably. For that, you have to undertake an accumulation technique. In case you hold accumulating a progress inventory for a very long time, it may well enhance your yield considerably. Even amongst dividend shares, there are dividend-growth shares which develop their dividends yearly as they develop their money movement. Canadian Pure Sources (Tsx: cnq) is one such inventory.
Investing in Canadian Pure Sources
Canadian Pure Sources has been rising dividends for the final 24 years at a compounded annual progress price (CAGR) of 23%. How does it handle to try this?
CNQ has low decline, high-value oil and fuel reserves, that are the world’s second-largest oil sands reserves with a 32-year life index. It even has a value benefit as oil sands mining has low upkeep capital necessities. CNQ’s West Texas Intermediate (WTI) breakeven is mid-$40/barrel after together with upkeep and dividend funds.
As CNQ incorporates dividends in its breakeven value, it plans yearly manufacturing capability and product combine relying on market pricing. If WTI is excessive, then heavy oil takes a bigger share of its manufacturing output, and when WTI is low, the higher-priced artificial crude oil takes a bigger share.
The technique behind dividend progress
When the oil value is excessive, CNQ enjoys greater free money movement, which it makes use of to repay debt and purchase again shares. This retains lowering its share depend, enabling it to develop dividends at a quicker tempo. In response to its free money movement (FCF) allocation coverage,
- 60% of FCF is returned to shareholders when web debt is over $15 billion;
- 75% is returned when web debt is $12-$15 billion; and
- 100% is returned when web debt is $12 billion.
On the finish of 2024, CNQ’s web debt was $18.7 billion because it acquired $8 billion value of oil sands reserves. Nevertheless, it returned 92% FCF to shareholders within the first quarter of 2025 and used roughly $1.4 billion to cut back web debt to $17.35 billion. If it continues to pay down debt at this tempo, it may cut back its web debt to $15 billion. Its low capital requirement ensures that even excessive debt is paid down at a quicker price.
What number of shares of Canadian Pure Sources do you have to get $13,640 yearly dividends?
Canadian Pure Sources’s low-risk enterprise mannequin ensures the corporate continues to develop dividends, making it a superb possibility for an accumulation technique. At current, it has an annual dividend yield of 5.56% however this will develop to twenty%.
In case you make investments $25,000 now, you should purchase 591 shares at $42.3 per share and earn $694 for the following two quarters of 2025. The corporate doesn’t provide a dividend-reinvestment possibility.
Furthermore, CNQ is a range-bound inventory, which hovers within the value vary of $40-$50. You possibly can accumulate CNQ shares at $45 or decrease. A $3,000 annual funding should buy you 67 shares. In case you goal to accumulate 67 shares yearly, your dividend will develop as follows.
I’ve assumed a ten% annual dividend progress.
| 12 months | CNQ Dividend/Share | Funding Quantity | Complete Share Rely | Annual Dividend Earnings |
| 2025 | $2.35 | $25,000 | 591 | $694.43 |
| 2026* | $2.585 | $3,000 | 658 | $1,700.93 |
| 2027* | $2.844 | $3,000 | 725 | $2,061.54 |
| 2028* | $3.128 | $3,000 | 792 | $2,477.26 |
| 2029* | $3.441 | $3,000 | 859 | $2,955.51 |
| 2030* | $3.785 | $3,000 | 926 | $3,504.63 |
| 2031* | $4.163 | $3,000 | 993 | $4,134.03 |
| 2032* | $4.579 | $3,000 | 1060 | $4,854.25 |
| 2033* | $5.037 | $3,000 | 1127 | $5,677.19 |
| 2034* | $5.541 | $3,000 | 1194 | $6,616.17 |
| 2035* | $6.095 | $3,000 | 1261 | $7,686.17 |
| 2036* | $6.705 | $3,000 | 1328 | $8,904.01 |
| 2037* | $7.375 | $3,000 | 1395 | $10,288.55 |
| 2038* | $8.113 | $3,000 | 1462 | $11,860.97 |
| 2039* | $8.924 | $3,000 | 1529 | $13,644.98 |
| Complete | $67,000 | $87,060.60 |
As your share depend will increase, so does your payout. Take into account investing via the Tax-Free Financial savings Account (TFSA) because it permits your investments to develop tax-free. As an alternative of withdrawing the dividend cash, you need to use it to purchase 67 shares of CNQ yearly. Since you’re utilizing the funding revenue to purchase extra shares, your TFSA contribution stays intact. Fourteen years of accumulation can earn $13,645 in yearly dividends, which, when divided by the $67,000 funding, provides an annual yield of 20%.