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.
When I was updating my spreadsheet, I noticed that Revenue, Earnings and Cash Flow as well as Dividend Payout Ratios have improved over the past 2 years.
The dividend yields used to be low (under 2%). The yields started to climb in 2008. Currently the yields are moderate (2 to 4%). The current dividend yield is 4.09%, with 5, 10 and historical yields at 3.11%, 2.42% and 0.65%. For most periods the dividend growth has been good (above 15%). It has slipped for the past 5 years to be at 14.6% per year. The last dividend increase was in 2019 and it was for 16.7%.
The Dividend Payout Ratios are fine. The DPR for EPS for 2018 is 71.3% with 5 year coverage at 111%. The 5 year coverage is high because they paid out more than the EPS in both 2014 and 2015. The DPR for 2019 is expected to be 46% with 5 year coverage at 92%. The DPR for CFPS for 2018 is 22% with 5 year coverage at 23%.
Debt Ratios are fine, but there is a vulnerability with the Liquidity Ratio where the company requires cash flow to cover current liabilities. The Long Term Debt/Market Cap Ratio for 2018 is 0.23. The Liquidity Ratio for 2018 is low at just 0.84. This means that the current assets cannot cover the current liabilities. If you added in cash flow after dividends the ratio becomes 1.65. The 5 year median is 1.36. The Debt Ratio is 1.97 with 5 year median at 2.01. The Leverage and Debt/Equity Ratios are 2.04 and 1.04.
The Total Return per year is shown below for years of 5 to 23 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 14.55% | 3.67% | 0.47% | 3.20% |
| 2008 | 10 | 21.45% | 9.01% | 6.21% | 2.80% |
| 2003 | 15 | 23.26% | 4.61% | 2.86% | 1.74% |
| 1998 | 20 | 18.30% | 11.38% | 9.38% | 2.00% |
| 1995 | 23 | 19.02% | 9.97% | 8.29% | 1.68% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.05, 21.23 and 25.41. The corresponding 10 year ratios are 14.47, 16.71 and 19.01. The corresponding historical ratios are 18.39. 23.17 and 28.63. The current P/E Ratio is 11.20 based on a stock price of $41.10 and 2019 EPS estimate of $3.67. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $48.19. The 10 year low, median, and high median Price/Graham Price Ratios are 0.83, 1.01 and 1.18. The current P/GP Ratio is 0.85 based on a stock price of $41.10. This stock price testing suggests that the stock price is relatively reasonable and below the medain.
I get a 10 year median Price/Book Value per Share Ratio of 1.36. The current P/B Ratio is 1.46 based on a stock price of $41.10, Book Value of $44,262M and Book Value of $28.13. The current ratio is higher than the 10 year median ratio by 7.6%. This stock price testing suggests that the stock price is relatively reasonable, but above the median.
I get an historical median dividend yield of 0.65%. The current dividend yield is 4.09% based on dividends of $1.68 and a stock price of $41.10. The current yield is some 529% above the historical median. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.60. The current P/S Ratio is 1.64 based on a stock price of $41.10, Revenue Estimate for 2019 of $39,535M and Revenue per Share of $25.12. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable, but above the median.
Results of stock price testing is that the stock price is mixed. The Dividend Yield test is a good one and it shows the stock as being cheap. The company tends to have good dividend growth. On some measures the price is just reasonable. This is because you cannot ignore the P/S Ratio testing. The P/B Ratio test shows the same thing, however a P/B Ratio of 1.46 is a good ratio. These tests show the stock as only reasonable because of problems in resources since the 2008 bear and recession.
Is it a good company at a reasonable price? This is one of the better resource stocks to invest in. I personally do not have much in resource stocks with only 1 stock representing around 1% of my portfolio. If you want to buy one resource, this is a good one and it is best to buy when the dividend yields are high. In this case it is the current yield is 4.09%. Never a better time to buy this stock.
When I look at analysts’ recommendations, I find Strong Buy (10), Buy (10) and Hold (6). The consensus would be a Buy. The 12 month stock price consensus would be $53.48. This implies a total return of $34.215 with 30.12% from capital gains and 4.09% from dividends.
See what analysts are saying on Stock Chase. It is considered a good company but many analysts do not like energy companies. David Jagielski on Motley Fool calls this a resilient company. A writer on Simply Wall Street thinks the long term debt is fine but worries about the Liquidity Ratio. Geoffrey Morgan on the Financial Post talks about the Oil Industry’s investment in clean tech. Lisa Durand on Dispatch Tribunal talks about recent analyst’s earnings estimates.
Suncor Energy is one of Canada's largest integrated energy companies, operating in western Canada, east coast Canada, the United States, and the North Sea. The upstream portfolio includes bitumen, synthetic crude, and conventional crude, which helps to offset higher-cost oil sands production. Its web site is here Suncor Energy Inc.
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 10, 2019 around 5 pm. Tomorrow on my other blog I will write about AG Growth.... learn more on Tuesday, July 9, 2019 around 5 pm.
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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment