Higher oil prices should help boost the cash flow significantly as the company looks to reach its carbon reduction goals. It recently rejected a proposal to sell or spin off its gas station networks.
Higher cash flow should allow for dividend increases, adding to an already solid yield and plenty of upside.
Meanwhile, the stock trades at just 8.8 times the company’s 2022 earnings forecast.
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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, along with 1,875 Petro-Canada gas stations.
Activist investment firm Elliott Management, which owns 3.4% of Suncor’s shares, wants the company sell or spin off its network of gas stations. Elliott feels this would boost Suncor’s share price to $60, or 30% more than the current price.
Suncor has rejected the proposal and will hang on to the gas stations.
The oil giant also aims to cut its carbon emissions to zero (on a net basis) by 2050.
Under that plan, the company has invested in renewable wind and solar energy projects. Those include eight wind farms in Saskatchewan, Alberta and Ontario.
However, Suncor feels it can better reach its carbon goals by focusing on carbon capture systems and fuels made from waste wood and other renewable sources. As a result, it now plans to sell its wind and solar projects. The company will probably complete these sales by the end of 2022.
Energy Stocks: Spending, production and cash flow should all rise
Suncor still expects to spend $4.7 billion on exploration and upgrades in 2022. That’s up 6.6% from $4.41 billion in 2021. Those outlays will increase its overall production by 3.3%, to 756,100 barrels a day in 2022.
Higher crude prices will also lift the company’s free cash flow (regular cash flow less capital expenditures) to around $13.0 billion in 2022 from $6.0 billion in 2021. That will give Suncor more room to lift your dividend and buy back shares. The stock is also attractive at just 8.8 times projected 2022 earnings of $5.66 a share.
The company is also increasing your quarterly dividend by 11.9%. Starting with the June 2022 payment, investors will receive $0.47 a share instead of $0.42. The new annual rate of $1.88 yields a high 3.8%. It also aims to buy back 10% of its common shares by February 7, 2023.
Suncor’s dividend has increased by an average 5.6% annually over the last 5 years. The company’s TSI Dividend Sustainability Rating is Above Average.
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We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
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Changes to this Policy
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