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Suncor: 4% Dividend Yield and the Highest Growth

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Suncor’s dividend yield

Suncor Energy’s (SU) dividend yield of 4.0% is the fifth highest among the six integrated energy stocks we’re looking at. BP (BP) and Total (TOT) have higher dividend yields, of 5.9% and 5.4%, respectively. Suncor has the lowest market cap in the group, of ~$50 billion.

This quarter, Suncor’s dividend is set to increase 17% YoY (year-over-year) to 0.42 Canadian dollars per share. Suncor stock has fallen 24% in the last year and 4% in the current quarter. Given its dividends and stock price decline, it’s no surprise Suncor’s dividend yield has surged. In Q1 2019, Suncor paid 662 million Canadian dollars in dividends and repurchased ~514 million Canadian dollars in stock.

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Valuation

Suncor’s forward PE multiple of 13.0x is above peers’ average, as is its forward EV[1.enterprise value]-to-EBITDA multiple. The stock has a higher valuation due to its strong financials and expected growth.

In Q1 2019, Suncor’s adjusted earnings rose 23% to 1.3 billion Canadian dollars, and its operating cash flow rose 114% to 1.5 billion Canadian dollars. The company’s adjusted earnings rose across its business segments, and its upstream production rose 11% YoY to 0.76 MMboepd (million barrels of oil equivalent per day). ExxonMobil’s (XOM), Chevron’s (CVX), and BP’s volumes were 3.98 MMboepd, 3.04 MMboepd, and 2.66 MMboepd, respectively, in the quarter.

Suncor has kept its growth focus. Analysts expect Suncor’s earnings to rise 23% this year, the most among peers. Royal Dutch Shell’s (RDS.A) and Total’s earnings are expected to grow 10% and 7%, respectively, this year, whereas BP’s and ExxonMobil’s are expected to fall 8% and 17%.

Among peers, Suncor has a lower dividend yield and higher valuation. However, the company has strong financials, and its earnings are expected to grow the most this year.

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