Picture supply: Getty Pictures
Suncor Power (TSX:SU) is among the many hottest dividend shares in Canada. Presently, Suncor pays shareholders an annual dividend of $2.18 per share, indicating a ahead yield of 4.1%.
Valued at $68 billion by market cap, Suncor Power is without doubt one of the largest vitality firms within the nation. It operates via segments similar to oil sands, exploration and manufacturing, and refining and advertising.
Within the final 20 years, Suncor Power has returned 206% to shareholders. Nevertheless, after adjusting for dividends, whole returns are nearer to 393%. Comparatively, the TSX index has returned 362% to shareholders in dividend-adjusted positive factors since April 2004.
As historic returns don’t matter a lot for buyers, let’s see if Suncor Power inventory is a purchase, promote, or maintain at present.
How did Suncor Power carry out in 2023?
Suncor Power’s sturdy upstream asset efficiency within the second half of 2023 drove document upgraded utilization of 92% — 3% larger than the earlier document. Its sturdy efficiency showcased Suncor’s power of its regional oil sands integration, which offers operational flexibility via interconnected pipelines.
Furthermore, the downstream operations enterprise additionally carried out effectively, with an annual refining utilization of 90%. Additional, Suncor introduced a brand new partnership with Canadian Tire in its retail enterprise. The partnership has allowed Suncor to safe a provide settlement for its refineries, leading to a 15% enhance in retail gasoline gross sales whereas increasing the presence of Petro-Canada branded stations throughout the nation.
Suncor reported adjusted funds from operations of $13.3 billion and deployed $5.57 billion towards capital expenditures. So, its free money stream stood at $7.73 billion. Suncor paid $2.74 billion in whole dividends to shareholders in 2023, indicating a payout ratio of lower than 40%.
A low payout ratio offers Suncor with the flexibleness to extend dividends additional, reinvest in development tasks, goal acquisitions, and decrease debt. Within the final 10 years, Suncor Power inventory has greater than doubled its dividend payouts, which is outstanding for an vitality inventory.
A deal with price optimization and liquidity
Just like a number of different firms throughout sectors, Suncor Power is targeted on reducing its price base to offset macro headwinds similar to rate of interest hikes and inflation. In 2023, it diminished “above-field” prices by $450 million through workforce reductions.
In 2024, Suncor goals to decrease working prices with the addition of 55 ultra-class 400-tonne vans to its mining fleet. The vans are anticipated to interchange much less environment friendly, higher-cost autos, producing important price financial savings in 2024 and past.
Within the final yr, Suncor accomplished the sale of non-core belongings, together with its U.Ok. North Sea upstream belongings and its renewable energy enterprise, for $1.8 billion, which was larger than value estimates.
The sale enabled Suncor to accumulate remaining working pursuits in Fort Hills for $2.2 billion, including 89,000 barrels per day of bitumen manufacturing capability. Suncor emphasised full possession of Fort Hills permits for regional synergies and improved decision-making.
The Silly takeaway
Suncor inventory surged over 20% in 2024 attributable to larger commodity costs. Sometimes, the efficiency of vitality shares, together with Suncor, is tied to grease costs, making them unstable.
Priced at 10.5 instances ahead earnings, Suncor inventory is sort of low-cost, particularly if oil costs stay elevated. Investing in Suncor Power inventory is good for income-seeking buyers who anticipate oil costs to realize momentum in 2024.
