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 this company did not have a good year in 2020, but this was expected. The company is expected to recover over the next two years. They are even expecting Suncor to increase dividends again in 2022.
The dividend yields are moderate with dividend growth probably moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.90%. The 5 and 10 median dividend yields are also moderate at 3.18% and 3.10%. The historical median dividend yield is low (less than 2%) at 0.69%. However, it is hard to say how valid this is as my spreadsheet came from PCA’s merger with Suncor. However, even Suncor had yields below 1% from 2000 to 2009.
The Dividend Payout Ratios (DPR) are expected to improve. The DPR or EPS for 2020 cannot be calculated because of an earnings loss. The 5 year coverage is 166%. Analysts expect this to come down in 2021 to 42% and continue to be better. The DPR for CFPS for 2020 is 43% with 5 year coverage at 26%. The DPR for Free Cash Flow for 2020 cannot be calculated because the FCF is negative in 2020. The 5 year coverage is 112%. Analysts expect this to be better in 2021 at 20% and be better in the future.
Debt Ratios are fine as Liquidity Ratio is expected to improve. The Long Term Debt/Market Cap Ratio for 2020 is 0.42. The current ratio is lower at 0.30. The Liquidity Ratio for 2020 is 0.89 and adding in Cash Flow after dividends it is still below 1.00 at 0.99. However, this improved in the first quarter to 1.09 and with Cash Flow after dividends to 2.09. The Debt Ratio for 2020 is good at 1.73. The Leverage and Debt/Equity Ratios for 2020 are fine at 2.37 and 1.37.
The Total Return per year is shown below for years of 5 to 25 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | -0.80% | -5.19% | -9.78% | 4.59% |
| 2010 | 10 | 10.59% | -2.06% | -5.67% | 3.61% |
| 2005 | 15 | 17.06% | -0.73% | -3.50% | 2.77% |
| 2000 | 20 | 15.39% | 4.59% | 1.81% | 2.78% |
| 1995 | 25 | 15.97% | 7.91% | 5.14% | 2.77% |
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 18.39. 22.42 and 27.51. The current P/E Ratio is 14.55 based on a stock price of $28.96 and EPS estimate for 2021 of $1.99. The current ratio is between the low and median 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $32.66. The 10 year low, median, and high median Price/Graham Price Ratios are 0.87, 1.01 and 1.28. The current P/GP Ratios is 0.89 based on a stock price of $28.96. The current ratio is between the low and median P/GP 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.36. The current P/B Ratio is 1.22 based on a stock price of $28.96, Book Value of $36,325M and a Book Value of $23.82. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.55. The current ratio is 4.28 based on a stock price of $28.96, Cash Flow per Share estimate for 2021 of $6.76 and a Cash Flow of $10,310M. The current ratio is 35% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 0.69%. The current dividend yield is 2.90% based on a stock price of $28.96 and dividends of $0.84. The current yield is 320% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.10%. The current dividend yield is 2.90% based on a stock price of $28.96 and dividends of $0.84. The current yield is 6% below the 10 year dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.71. The current P/S Ratio is 1.23 based on Revenue estimate for 2021 of $35,975M, Revenue per Share of $23.59 and a stock price of $28.96. The current ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably reasonable, if not cheap. The dividend yield tests give up a cheap and reasonable stock price. Dividends were cut in 2019. The P/S Ratio says that the stock price is relatively cheap. The P/B Ratio test says the stock price is reasonable and below the median.
Is it a good company at a reasonable price? The stock price is reasonable. This is oil and gas company and this is the sort of company I tend not to invest in. Any resource stock tests to be volatile and this is why I tend not to invest in this area.
When I look at analysts’ recommendations, I find Strong Buy, (6), Buy (8) and Hold (6). The consensus would be a Buy. The 12 month stock price consensus is $37.16. This implies a total return of 31.22%, with 28.31% from capital gains and 2.90% from dividends.
Most analysts really like this stock on Stock Chase. Rajiv Nanjapla on Motley Fool says this is one of his four top buys for July 2021. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and 3 risks. A writer on Simply Wall Street thinks the Fair Value of this stock is $37.94. Michael Boyd on Seeking Alpha does an analysis of this stock.
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 LifeWorks Inc (TSX-MSI, OTC-MSIXF) ... learn more on Friday, July 09, 2021 around 5 pm. Tomorrow on my other blog I will write about Something to Buy July 2021.... learn more on Thursday, July 08, 2021 around 5 pm.
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