20 Mar

Will Suncor’s Shareholder Returns Continue to Rise?

WRITTEN BY Maitali Ramkumar

Suncor’s shareholder returns

Suncor Energy’s (SU) shareholder returns have grown consistently over the past few years. The company hasn’t forgotten its commitment to growth.

Let’s review how Suncor’s shareholder returns shaped up in 2018.

Will Suncor’s Shareholder Returns Continue to Rise?

In 2018, Suncor’s cash outflows on account of dividends stood at 2.3 billion Canadian dollars, and its share repurchases stood at 3.1 billion Canadian dollars. Cumulatively, Suncor’s total cash outflows toward shareholders’ returns rose ~70% from 2014 to 5.4 billion Canadian dollars in 2018.

In all these years, Suncor focused on achieving an optimal balance between its capex requirements and its shareholder returns. The company is now in a position to pay increasing dividends and incur sustenance capex at a low oil price level of ~$45 per barrel, implying that its dependence on higher oil prices for shareholder returns has now reduced—a favorable scenario for investors.

Will Suncor’s shareholder returns continue to rise?

Going forward, Suncor expects its shareholder returns to continue to grow. Suncor’s first-quarter dividend payment represents 17% year-over-year growth. It will pay a first-quarter dividend of 0.42 Canadian dollars per share on March 25. This dividend represents the 17th consecutive rise in the company’s dividend payments.

Suncor’s dedication to growing its shareholder returns was reiterated by Steve Williams, Suncor’s president and CEO, during the company’s fourth-quarter earnings call. Williams stated, “We remain committed to returning value to our shareholders. The execution of our $3 billion stock buyback program, a further $2 billion stock buyback program and a 17% dividend increase demonstrates the ability of our business model to substantially grow shareholder returns.”

Suncor’s current dividend yield is 3.7%, up from 2.8% in the first quarter of 2018. The increase in its yield is the result of a rise in its dividend in the stated period.

Peer comparison

Suncor has a lower dividend yield than its peers ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), BP (BP), Total (TOT), and Equinor (EQNR). Shell and BP have dividend yields of 5.9% and 5.6%, respectively. Total’s current yield is 5.0%. ExxonMobil, Equinor, and Chevron have dividend yields of 4.0%, 4.2%, and 3.8%, respectively.

In the next article, we’ll review Suncor stock’s valuation.

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