Suncor Energy Inc.

I do not own this stock of Suncor Energy Inc. (TSX-SU, NYSE-SU). I started following this stock as Petro-Canada. It was on Mike Higgs' list of dividend growth stocks. This was also a key stock for the Investment Reporter. My spreadsheet follows PCA into SU.

This is an oil and gas company with a very low dividend, but very good increases. The 10 year median dividend yield is just 0.85%. The 5 year median dividend yield is 1.27% and the current dividend yield is 2.92%. The 5 and 10 year dividend growth rate is 29% and 28% per year over the past 5 and 10 years. The last dividend increase at the beginning of 2014 was for 15%.

The dividend yield on this stock has been higher lately because the stock price is down. You can also see this happening in the P/E Ratio. For example, the 10 year median Price/Earnings per Share Ratio is 19.86 but the 5 year median P/E Ratio is lower at 13.89.

The Dividend Payout Ratios are good with 5 year medina DPR for EPS at 28% and for CFPS at 9%. The DPR for 2013 for EPS was at 28% and for CFPS was at 10%.

The total return over the past 5 and 10 years is acceptable, but it is not great. The total return over these periods is at 5.60% and 7.76% per year with the portion attributable to capital gains at 4.15% and 6.68% per year and the portion attributable to dividends at 1.44% and 1.08% per year.

This sort of stock is expected to provide total returns with a high rate of capital gains and low rate of dividends over the longer term. Since we are still in a cyclical bear market, I would not expect to receive high capital gains over the next 5 and 10 years.

The value of such stock is the high dividend increases. By having such stock you can have your dividend portfolio produce nice dividend growth year over year.

The outstanding shares have increase by 1% and 1.4% per year over the past 5 and 10 years. Shares have increased due to Stock Options, DRIP and have decreased due to Buy Backs. With Revenue and Cash Flow, growth is fine for the last 10 years, but there is no growth over the past 5 years. For EPS there is good growth over the past 5 and 10 years.

Revenue per Share is down by 9.5% per year over the past 5 years and up by 4.3% per year over the past 10 years. Looking at Revenue and at 5 year running averages, they are similar, except the 5 year running averages produce slightly better results.

Earnings per Share are up by 5.3% and 10.5% per year over the past 5 and 10 years. Cash Flow per Share is down by 6.6% and up by 4.2% per year over the past 5 and 10 years.

The Return on Equity is below 10% in 4 years in the past 5 years and also in 4 years in the past 10 years. The ROE for 2013 is at 9.5% and the 5 year median ROE is also 9.5%. The ROE for comprehensive income for 2013 is better at 11.5%. However, the 5 year median value is a bit lower at 8.5%.

The debt ratios are fine. The Liquidity Ratio for 2013 is 1.39. If you add in cash flow after dividends, the value is 2.24. The Debt Ratio is 2.11 which is a very good value. The Leverage and Debt/Equity Ratios are also quite good at 1.90 and 0.90.

This is the sort of stock you buy to increase your dividend growth rate for dividend portfolio. See my spreadsheet at su.htm.

This is the first of two parts. The second part will be posted on Monday, July 7, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Suncor Energy Inc. is an integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. Suncor is also developing a growing renewable energy portfolio. Their international and offshore business includes operations in the North Sea (United Kingdom, Netherlands and Norway) and the East Coast of Canada. They are also in Libya, Syria and Trinidad and Tobago. Its web site is here Suncor.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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