Suncor Energy Inc.

Sound bite for Twitter and StockTwits is: Cheap and risky. If you think oil will recover it is best to buy low dividend yield oil stocks when the dividend yield is relatively high. The tests that do not involved estimates show that the stock price is cheap to reasonable. I would buy this company but only at times that the dividend yield was over 1%. See my spreadsheet on 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 (TSX-PCA). 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. PCA and SU merged in 2009.

Currently the dividend yield is quite high compared to historical yields. The historical high is 3.27%. The current dividend yield is 3.17% based on dividends of $1.16 and a stock price of $36.65. They have had a great run with dividend increases. The 5 and 10 growth is at 23.3% and 27.2% per year. However, the most recent increase in 2015 was for only 3.6%.

Generally, they have had good Dividend Payout Ratios, with the 5 year median at 28%. However, last year there was an earnings loss and an earnings loss is also expected for 2016. The DPR for CFPS has been good. The 5 year median value is 11%. In 2015, the DPR for CFPS was 24%.

Stock price prices have basically gone nowhere since 2009. The 5 and 10 year total return is at 0.67% and 1.16% per year. The portion of this return attributable to dividends is 2.04% and 1.36% per year over the past 5 and 10 years. The portion of this return attributable to capital loss is 1.37% and 0.20% per year over the past 5 and 10 years.

I cannot test out the stock price using Price/Earnings per Share Ratios because the EPS is expected to be negative in 2016. However, the 5 year low, median and high median P/E Ratios are 10.58, 13.45 and 17.37. The 10 year corresponding values are higher at 12.94, 16.85 and 21.99. The historical values are even higher at 18.57, 23.89 and 29.58.

I get a Graham Price $26.15. This Graham Price is a lot lower than it was recently. For example, in 2013 and 2014, the Graham Prices were $40.37 and $34.54. The 10 year Price/Graham Price Ratios are 0.83, 1.07 and 1.37. The current P/GP Ratio is 1.40 based on a stock price of $36.65.

I get a 10 year Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 1.35 based on a stock price of $36.65 and BVPS of 27.14. This stock price testing suggests that the stock price is reasonable and at the median.

In such cases as these, this is where the dividend yield gives you a clearer picture of the stock price. The historical median dividend yield is just 0.59%. The current dividend yield at 3.17% is some 436% higher. The current dividend yield is just 35 lower than the historical dividend yield high. This stock price testing suggests that the stock is cheap.

The analysts' recommendations are all over the place. There are Strong Buy, Buy, Hold, Underperform and Sell recommendations. Most of the recommends are a Buy. The consensus would be a buy. The 12 month price consensus is $40.50. This implies a total return of 13.67% with 10.50% from capital gains and 3.17% from dividends.

Jacob Donnelly of Motley Fool thinks that this company is a good buy and you should ride out its period of acquisitions. The CFO of Suncor says it is looking for more assets to buy. John Tilak and Nia Williams of Reuters talk about Suncor looking for acquisitions in the North Sea and Easter Canada in this Financial Post article. This Press Reader article talks about the recent National Post article about Suncor Energy offering to repurchase its own notes to reduce debt.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

The last stock I wrote about was about was Premium Brands Holdings Corp (TSX-PBH, OTC- PRBZF)... learn more. The next stock I will write about will be Empire Company Ltd (TSX-EMP.A, OTC- EMLAF)... learn more on Wednesday, July 6 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks July 2016... learn more on Tuesday, July 5, 2016 around 5 pm.

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 Energy Inc.

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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.