Get a 4.5% Yield From Suncor Energy

Suncor Energy continues to demonstrate exceptional operational performance, achieving record-breaking output and utilization rates in its most recent quarter. The company’s successful debt reduction to $7.97 billion has triggered enhanced shareholder returns including a commitment to direct 100% of excess cash flow to share repurchases.

This financial discipline, coupled with a 4.6% dividend increase, reflects management’s dedication to delivering value to shareholders.

Meanwhile the stock trades at just 5.0 times the company’s likely 2024 cash flow per share.

SUNCOR ENERGY INC. (Toronto symbol SU; www.suncor.com) is Canada’s largest integrated oil firm, with major projects in the Alberta oil sands. It also operates four refineries (three in Canada and one in Colorado), along with over 1,800 Petro-Canada gas stations.

Suncor now expects to spend between $6.1 billion and $6.3 billion on exploration and upgrades in 2025. That’s down from this year’s spending forecast of $6.3 billion to $6.5 billion. About two-thirds of those outlays will go to its oil sands projects. Those investments should lift Suncor’s average production for 2025 by roughly 4%, to between 810,000 and 840,000 barrels a day.

Suncor also expects to increase its refinery volumes by about 1%, to between 435,000 and 450,000 barrels a day, in 2025.

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The company also continues to cut its debt thanks to rising production and improving efficiency. Its net debt (total debt less cash balances) is now $7.97 billion (as of September 30, 2024), down 19.0% from $9.84 billion a year earlier.

Under its current policy, once net debt is below $8.0 billion, Suncor will return 100% of excess cash flow to share repurchases. In the third quarter of 2024, it spent $804 million on those buybacks.

Energy Stocks: Activist investor has made an impressive impact at Suncor

In 2022, activist investment firm Elliott Management acquired 3.4% of Suncor’s shares. It wanted the company to sell or spin off its network of gas stations.

While Suncor eventually rejected that proposal, it did agree to appoint a new CEO, Rich Kruger, who has re-focused the company on its main oil sands operations and improved its safety record and efficiency.

Elliott is so confident in Suncor’s prospects that it has doubled its stake in the company to roughly $3 billion U.S. That’s equal to 6.8% of its $63.9 billion (Canadian) market cap.

The stock trades at an attractive 5.0 times its likely 2024 cash flow of $10.20 a share.

The company has now raised your quarterly dividend by 4.6%. Starting with the December 2024 payment, investors receive $0.57 a share instead of $0.545. The new annual rate of $2.28 yields a high 4.5%

Over the past five years, Suncor has increased its dividend by an average of 5.3% annually. Its TSI Dividend Sustainability Rating is Above Average.

Recommendation in The Successful Investor: Suncor Energy Inc. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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