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 analysts do not expect this company will do very well this year, but they expect better things in 2021 and 2022. This is showing up in the first quarter of 2020 where there is an EPS loss of $2.31. There is also a 40% decline in Revenue expected and over 66% decline in Cash Flow expected.
The dividend yields are moderate with dividend growth moderate. The current dividend is moderate (2% to 4% ranges) at 3.64%. The 5, 10 year median dividend yields are moderate at 3.17% and 2.85%. The historical median yield is low (below 2%) at 0.67%. They have had a good record of dividend increase. However, this year they reduced the dividend by 55%.
The Dividend Payout Ratios (DPR) could be improved. The DPR for 2019 for EPS is 91% with 5 year coverage at 123%. This is too high. The DPR for 2019 for CFPS is 24% with 5 year coverage at 25%. This is fine. The DPR for Free Cash Flow is 54% with 5 year coverage at 90%. The 5 year coverage is too high.
Debt Ratios are currently fine. The Long Term Debt/Market Cap Ratio for 2019 is good at 0.20. It is currently higher, but still good at 0.39. It went up because of increased debt, but also more from the decline in the stock price. The Liquidity Ratio for 2019 is low at 0.94. If you add in cash flow after dividends it is 1.68. The Debt Ratio for 2019 is fine at 1.89. The Leverage and Debt/Equity Ratios for 2019 are 2.13 and 1.13 and are fine.
The Total Return per year is shown below for years of 5 to 24 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 10.49% | 6.29% | 2.90% | 3.40% |
| 2009 | 10 | 18.80% | 3.72% | 1.35% | 2.37% |
| 2004 | 15 | 21.21% | 5.87% | 3.92% | 1.95% |
| 1999 | 20 | 18.85% | 10.75% | 8.72% | 2.03% |
| 1995 | 24 | 18.92% | 10.17% | 8.43% | 1.74% |
I decided also to do one to date as a lot has changed for this stock this year. The Total Return per year is shown below for years of 5 to 25 to date. 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. Currently long term investors are doing less well.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | -0.80% | -3.94% | -8.39% | 4.44% |
| 2009 | 10 | 10.59% | -1.48% | -4.95% | 3.47% |
| 2004 | 15 | 17.06% | -0.36% | -3.01% | 2.65% |
| 1999 | 20 | 15.39% | 4.86% | 2.20% | 2.65% |
| 1995 | 25 | 15.97% | 8.11% | 5.46% | 2.65% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.59, 22.31 and 24.85. The corresponding 10 year ratios are 14.47, 16.71 and 19.01. The corresponding historical ratios are 11.19, 22.46 and 27.69. The current P/E Ratio is negative, so this test cannot be done. The P/E Ratio for 2021 is 32.01 and for 2022 is 11.47. Problem is that earnings over this year and next are expected to be non-existent to low.
I get a Graham Price of $20.08. The 10 year low, median, and high median Price/Graham Price Ratios are 0.87, 1.01 and 1.18. The current P/GP Ratio is 1.15 based on a stock price of $23.05. This stock price testing suggests that the stock price is relatively reasonable but above the median. There are problems with the Graham Price calculation because of 2020 negative EPS, but this is my best guess for a Graham Price.
I get a 10 year median Price/Book Value per Share Ratio of 1.36. The current P/B Ratio is 1.25 based on a Book Value of $37,965M, Book Value of 24.89 and a Stock price of $23.05. The current ratio is 32% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.55. The current ratio is 10.20 based on a stock price of $23.05, CFPS estimate for 2020 of $2.26 and Cash Flow of $3,447. The current ratio is 56% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, this current ratio is high because cash flow is expected to drop in 2020. In 2021, the ratio is expected to be 5.27, 20% lower than the 10 year ratio.
I get an historical median dividend yield of 0.67%. The current dividend yield is 3.64% based on a stock price of $23.05 and dividends of $0.84. The current dividend yield is 444% higher than the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.85%. The current dividend yield is 3.64% based on a stock price of $23.05 and dividends of $0.84. The current dividend yield is 28% higher than the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.53. The current P/S is 1.48 based on 2020 Revenue estimate of $23,706, Revenue per Share of $15.54 and a stock price of $23.05. The current ratio is 3% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. The P/S Ratio for 2021 is 1.24, which is 19% below the 10 year ratio.
Results of stock price testing is that the stock price is probably relatively cheap. The only clear test with no problems is the P/B Ratio test and this shows the stock as cheap. The Dividend Yield tests are showing the stock price as cheap even though the dividends were recently cut by 54%. The P/S Ratio test shows the stock price as reasonable and below the median. However, Revenues are expected to fall big time in 2020, but start to recover in 2021.
The P/CF Ratio test is showing the stock price as expensive, but this is also because the cash flow is expected to take a big drop in 2020 and also start to recover in 2021. Both the P/GP Ratio test and the P/E Ratio tests are affected by the negative EPS expected in 2020.
Is it a good company at a reasonable price? The price is probably reasonable. However, even though some people have made money long term in resource stocks and they make up a lot of the TSX, I have little in resource stocks and tend not to recommend them.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (12) and Hold (5) recommendations. The 1 year stock price consensus is $31.74. This implies a total return of $41.34% based on a current stock price of $23.05 with 37.70% from capital gains and 3.64% from dividends.
Analysts feel this is currently a buy on Stock Chase. Brian Pacampara on Motley Fool thinks this stock is currently a buy because it can maintain cash flows. A writer on Simply Wall Street says the P/E Ratio for this stock is higher than others in the sector. A writer on Simply Wall Street thinks this company has too much debt. Shelly Janes on Modern Reader talks about FDx Advisors buying shares in this company.
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. 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 Morneau Shepell Inc (TSX-MSI, OTC-MSIXF) ... learn more on Wednesday, July 07, 2020 around 5 pm. Tomorrow on my other blog I will write about Royal Caribbean.... learn more on Tuesday, July 6, 2020 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