This stock turned $10,000 into $10 million tax-free in 25 years — and it’s still going strong

Canadian Natural Resources’ disciplined approach to capital allocation is about “as close to saintly as anything involving tar sands can get,” writes Charlie Garcia. - Getty Images

Most investors spend their days glued to stock tickers like teenagers monitoring their Instagram likes. Warren Buffett, bless his Omaha soul, can’t be bothered.

He’s figured out something the rest of Wall Street seems constitutionally incapable of grasping: that dividends are boring — which is precisely why they work.

Most Read from MarketWatch

My uncle’s widow is threatening to sue me. She wants money from my grandmother’s estate. Should I be worried? ‘I’d hate to turn her over to the state’: My mother, who has dementia, refuses to be put in a facility. What can we do? ‘I have no retirement savings’: My wife and I are in our 40s. She has an $85K Roth IRA. Is it too late for me?

Buffett spelled it out in his 2014 letter to Berkshire shareholders with all the subtlety of a divorce lawyer explaining alimony. Invest a thousand bucks in the S&P 500 SPX back in 1964, sit on your hands for 50 years, and you’d have twenty-four grand.

Respectable, if you enjoy waiting half a century for what amounts to a decent used car.

But reinvest those dividends — actually use the cash to buy more shares instead of blowing it on avocado toast — and that same thousand balloons to $112,000.

That’s not a typo. It’s mathematics. Which has the advantage of being true whether you believe in it or not.

Hartford Funds did the arithmetic: Since 1960, dividends and reinvesting them account for 85% of the market’s total returns.

Which means stock prices themselves — the thing everyone obsesses over — contribute about as much to your wealth as the participation trophy you got in Little League.

Buffett gets this. Back in the late ’80s, Buffett’s Berkshire Hathaway BRK.A BRK.B dropped $1.3 billion on Coca-Cola stock. Today, Coke KO mails him $816 million annually — and it’s increased that dividend every single year since he bought it, growing 8% annually for 37 straight years.

It’s like buying a house once and having your tenants pay you back nearly two-thirds of the purchase price every single year, forever — with the rent going up 8%.

Try getting that deal from your rental property.

Now, Buffett likes companies that raise dividends steadily — 5% to 8% annually. Solid, sensible. The investment equivalent of wearing a seatbelt.

But what if you found a company hiking dividends more than 20% every year for 25 consecutive years? You’d assume it was either impossible or funded by Colombian pharmaceutical exports. Yet this company exists.

This company should be more famous than the Kardashians, except Wall Street maintains a silence so deafening you’d think someone discovered Jimmy Hoffa in the executive suite.

Story Continues

Why the hush? Because this company produces oil, and today’s analysts would sooner attend a PETA barbecue than recommend energy stocks.

That unapologetically profitable company is Canadian Natural Resources CNQ. I’ve owned this stock for five years. If I didn’t, I’d buy it today — the same fundamentals that drove 25 years of 21% dividend growth are still in place.

Wall Street won’t mention it, but now you know.

Dividend Aristocrats, step aside

Wall Street adores its aristocracy.

First come the Dividend Aristocrats — companies raising dividends for 25 straight years. Reliable, respectable and about as exciting as oatmeal.

Above them sit the Dividend Kings, who’ve hiked dividends for 50 years. These are the bluebloods, the old money of the investment world, steady as a metronome and just as thrilling.

But even kings stumble. We’ve endured four apocalyptic market crashes in the last quarter-century: the dot-com implosion; the 2008 financial crisis; the oil crash; and whatever, at this point, we’re calling the pandemic disaster.

Some Aristocrats froze dividends. Some Kings hit pause. Everyone got nervous.

Then came April 2020, when oil hit negative $37 a barrel. Negative. Sellers were paying buyers to take the stuff. Adam Smith wept. Storage tanks were full, demand had evaporated and the market’s invisible hand flipped everyone the bird.

For one glorious afternoon, oil traders were essentially reverse-panhandling: “Please, sir, take this barrel of West Texas Intermediate. Here’s forty bucks. I insist.”

Through it all, one oil company didn’t flinch. Calmly, quietly, CNQ kept hiking dividends — which have compounded at 21% annually for 25 consecutive years. Out of 53,000 publicly traded companies worldwide, only CNQ has achieved this distinction.

If that’s not a financial miracle, I don’t know what is. Every religion requires saints, and CNQ qualifies. But since CNQ is still operating out of Calgary and hasn’t ascended to heaven yet, we’ll name our saint after Alberta’s legendary premier, Peter Lougheed — whose first name was actually Edgar. The man who famously told Ottawa to keep its bureaucratic mitts off Alberta’s oil.

A politician who actually defended taxpayers? Miracles really do exist. Saint Edgar of Alberta: patron saint of disciplined capital, guardian of dividends, protector of anyone smart enough to ignore cable news.

A miraculous recipe: free cash flow and discipline

How does CNQ pull off these miracles? Relentless discipline, the kind that makes Trappist monks look impulsive. Next time markets tremble, CNQ investors can join in prayer: “Safeguard our yield; guide our capital, protect our dividends from bear markets and cable news prophets peddling doom.”

In 2024, despite commodity markets behaving like drunken sailors, CNQ generated $5.9 billion in free cash flow. Its break-even oil price sits at U.S. $40 to $45 per barrel, meaning it profits even when the market’s having a nervous breakdown.

Operating costs? Around U.S. $15 per barrel — exceptionally low for oil-sands production and lower than most people’s hourly wage.

And here’s what makes CNQ’s dividend growth sustainable: Unlike conventional oil companies with 30% to 50% annual production decline rates, CNQ’s oil-sands mining operations have a 0% decline rate. Build the mine once, and it produces steadily for decades.

It’s less oil drilling, more manufacturing. And combined with CNQ’s tiered capital-allocation framework — which automatically increases shareholder returns as debt falls — that 21% dividend growth isn’t a fluke. It’s engineered.

CNQ recently acquired Chevron’s CVX Canadian assets for $6.5 billion, further cementing CNQ’s position as the company even market crashes can’t rattle.

This disciplined capital allocation — returning all free cash flow to shareholders via dividends and buybacks — makes it practically saintly. Or as close to saintly as anything involving tar sands can get.

The dividend miracle you’d be a fool not to own

Suppose you’d invested ten grand in CNQ through your Roth IRA on Jan. 2, 2000, at age 45, then promptly forgot about it. You’d have purchased 12,500 shares at $1.20, in Canadian dollars, on the Toronto Stock Exchange. Let dividends reinvest automatically, let four 2-for-1 stock splits multiply your shares.

Today you’re 70, ready to retire. You own 322,772 shares worth $10,315,796 — completely tax-free. That’s not a misprint. That’s what happens when you choose wisely and let compounding do the heavy lifting while you’re busy living your life.

Financial types call a stock that turns $10,000 into a million a “100-bagger” — the holy grail of investing. This is a 1,000-bagger.

Your dividend income in 2025? $762,550 — 76 times your original investment arriving as passive income. Every penny tax-free.

Ignoring this opportunity is like discovering the Rosetta Stone and using it as a doorstop. If CNQ’s 21% dividend growth continues, you’d collect $7.7 million in tax-free dividend income between 2026 and 2030 while your $10 million–plus nest egg sits untouched.

Let that sink in: All of it’s yours. Zero to the taxman.

One caveat for U.S. investors: CNQ dividends face a 15% Canadian withholding tax outside retirement accounts. Hold them in any IRA or 401(k), and you dodge the withholding.

But put them in a Roth? The taxman gets zero. You get richer.

If that doesn’t qualify as miraculous, nothing does.

He holds shares of Canadian Natural Resources (CNQ).

More from Charlie Garcia:

How this Middle East oil giant got a nuclear big brother — and why your portfolio will feel the heat

You’ve got less than 5 years to rescue your money from AI and stablecoins. Here’s what to do.

And now for Washington’s next trick — sawing the dollar’s value in half

When the world’s largest asset manager and the ‘bond king’ both agree — run to gold, silver and bitcoin

Most Read from MarketWatch

‘I don’t wish to be petty’: My mom, 94, is leaving her $1 million estate to me, my brother and his daughter. Is that fair? I’m 58, divorced and will retire at 60 with $5,300 a month. Is now a good time to buy a house? Social Security’s COLA announcement is back on as some furloughed workers return to produce September inflation report

View Comments