Canadian Natural Resources (NYSE:CNQ) is the largest natural gas and heavy oil producer in Canada, yet few investors outside the Great White North know much about the company. And they've missed out on what's been a great income stock over the years. Not only has Canadian Natural Resources paid a dividend each quarter since initiating one in 2001, but the company has also increased it every single year since then, which is impressive when you consider that many of its rivals had to stop paying theirs when oil prices crashed a few years ago. And most of these increases have been generous, with the company delivering a 22% compound annual growth rate in its dividend since 2009. That dividend growth is a big reason shares currently yield 3.1%, well above the 1.8% average of stocks in the S&P 500.

That dividend growth appears poised to continu because the company took advantage of opportunities during the recent market downturn to significantly expand its portfolio. That growth, when combined with an improving oil market, positions Canadian Natural Resources to continue increasing its dividend for years to come.

Piles of coins are lined up in progressively taller stacks, resembling an upward-moving stock chart. A hand places a coin on the highest stack.

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Betting big on the oil sands

Canadian Natural Resources spent the past several years expanding its oil sands business in Canada. One route it took was to invest an estimated CA$7.2 billion ($5.6 billion) to increase the capacity of its Horizon oil sands facility. The company completed phase 2A of that expansion in 2015, which added 10,000 barrels per day (BPD) of capacity. It finished phase 2B late the following year, boosting capacity another 45,000 BPD, before finishing phase 3 last year, which added 80,000 BPD to bring the facility's total to 250,000 BPD.

The second expansion track the company took was the acquisition of a 70% interest in the Athabasca Oil Sands Project from Royal Dutch Shell (NYSE:RDS-A)(NYSE:RDS-B) and Marathon Oil (NYSE:MRO). The company paid CA$12.74 billion ($9.9 billion) in cash and stock for this world-class oil sands mining asset, which was less than the cost of building a similar project. The sale enabled Shell and Marathon to get some cash to pay down debt, while the transaction added two mines to Canadian Natural Resources' portfolio that have the capacity to produce 280,000 BPD. In addition, the company picked up a stake in a 100,000 BPD expansion project and acquired several other oil sands leases from Shell and Marathon, two of which were producing an average of 13,800 BPD.

These investments have positioned Canadian Natural Resources to grow its production rate from an average of 805,782 barrels of oil equivalent per day (BOE/D) in 2016 to between 1.073 million-1.152 million BOE/D in 2018. Meanwhile, with oil prices on the upswing, Canadian Natural Resources will see its earnings surge this year. Even better, free cash flow will grow at an even faster pace, since the company's capital spending has declined with the completion of Horizon's third phase.

Oil sands open pit mining in Fort McMurray, Alberta, Canada.

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A growing gusher of free cash flow

Canadian Natural Resources expects its free cash flow after dividends to rise from around CA$1 billion ($770 million) last year to between CA$2 billion and CA$4 billion ($1.6 billion-$3.1 billion) in 2018, assuming oil averages between $52 and $65 a barrel this year. That number could widen to as much as CA$6 billion ($4.6 billion) by 2021, fueled solely by the growth projects the company has under way.

Overall, Canadian Natural Resource expects to invest about CA$4.5 billion ($3.5 billion) per year to sustain and grow its production base. The company has several expansion projects under way, including Primrose and Kirby North in the oil sands region, which will add 25,000 BPD and 40,000 BPD in 2019 and 2020, respectively. Meanwhile, the company is looking at another expansion of its Horizon mine, which could add 95,000 BPD of capacity. These and other projects position Canadian Natural Resources to grow its production at a 4% compound annual rate through 2021.

Plenty of fuel to continue increasing the dividend

With Canadian Natural Resources able to fund a steady diet of expansion projects while still generating significant free cash flow, it has ample flexibility to continue returning more cash to shareholders. The company will probably use some of that money to repurchase shares. However, given its history, Canadian Natural Resources is likely to put a priority on increasing its dividend each year. Given the numbers the company expects to put up, it could continue delivering impressive dividend growth in each of the next five years, which is something income-seeking investors won't want to miss.