Sound bite for Twitter and StockTwits is: Dividend Growth Resource. The stock price would seem to be cheap. Analyst expect this company to do well in 2022. The company seems to expect this as well with their recent dividend increase. The Dividend Payout Ratios (DPR) are high in 2021, but expected to be good in 2022. See my spreadsheet on Suncor Energy Inc.
Is it a good company at a reasonable price? The price would seem to be cheap. At least that is what is expected because of the analysts estimates. Also, the company just raised the dividends, so the company thinks that they will do well in 2022. Personally, I invest little into resource stocks because of volatility and I think you get better long term results from other sectors. I have a bit in resources, just so that I will pay attention to this sector as it is an important sector for the TSX.
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 both Revenue and EPS came in higher than analysts had anticipated. Revenue expected was 35,975M and it came in at $39,101. EPS expected was $1.99 and it came in at $2.77.
As you can see in the section below, it can pay to buy dividend paying stocks. The 10 year total return is 2.40% per year, with a capital loss of 1.59% per year and dividends of 3.99% per year. I have seen this a lot in dividend paying stock, where shareholders do not have a total loss because of the dividend payments.
If you had invested in this company in December 2011, $1028.30 you would have bought 35 shares at $29.38 per share. In December 2021, after 10 years you would have received $388.33 in dividends. The stock would be worth $876.05. Your total return would have been $1,264.38.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $29.38 | $1,028.30 | 35 | 10 | $388.33 | $876.05 | $1,264.38 |
The dividend yields are moderate with dividend growth restarting. The current dividend yield is moderate (2% to 4% ranges) at 4.34%. The 5 year, 10 year dividend yields are also moderate at 3.95% and 3.14%. The historical dividend yield is low (less than 2%) at 0.87%. Dividends were decreased in 2020 and 2021. The dividends were increased by 12% in 2022. The decrease in dividends was for 50% in 2020, and the increase was 100% in 2021. In the end, current dividends are around 9% higher in 2022 than they were in 2019.
The Dividend Payout Ratios (DPR) are high in 2021, but expected to be good in 2022. The DPR for EPS for 2021 is 38% with 5 year coverage at 101%. The DPR for EPS is expected to be around 22% in 2022 with a 5 year coverage at 59%. The DPR for Cash Flow per Share for 2022 is 15% with 5 year coverage at 23%. The DPR for Free Cash Flow for 2021 is 36% with 5 year coverage at 67%. The DPR for FCF in 2022 is expected to be 20% with 5 year coverage at 44%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is 0.39 and this is fine. The Liquidity Ratio for 2021 is 1.06. If you had in cash flow after dividends, it is 2.04. The Debt Ratio for 2021 is 1.78. The Leverage and Debt/Equity Ratios for 2021 are 2.29 and 1.29 and they are fine.
The Total Return per year is shown below for years of 5 to 26 to the end of 2021 for Suncor. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | -1.97% | -6.92% | -10.63% | 3.71% |
| 2011 | 10 | 9.34% | 2.40% | -1.59% | 3.99% |
| 2006 | 15 | 13.85% | -1.47% | -3.96% | 2.50% |
| 2001 | 20 | 13.39% | 6.20% | 3.26% | 2.94% |
| 1996 | 25 | 10.85% | 11.78% | 8.14% | 3.64% |
| 1995 | 26 | 12.88% | 8.99% | 3.90% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.63, 15.44, and 17.25. The corresponding 10 year ratios are 14.47, 16.71 and 18.95. The corresponding historical ratios are 18.22, 22.38 and 27.33. The current P/E Ratio is 5.30 based on a stock price of $43.32 and EPS estimate for 2022 of $8.17. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $69.87. The 10 year low, median, and high median Price/Graham Price Ratios are 0.87, 1.01 and 1.16. The current P/GP Ratio is 0.62 based on a stock price of $43.32. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.36. The current P/B Ratio is 1.63 based on a stock price of $43.32, Book Value of $38,274 and Book Value per Share of $26.56. The current ratio is 20.2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is based on last 12 months of data, not estimate for 2022, which most of the other tests are based on.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.55. The current ratio is 3.19 based on Cash Flow per Share estimate for 2022 of $13.60, Cash Flow of $19,601M and a stock price of $43.32. The current ratio is 51% 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 0.87%. The current dividend yield is 4.34% based on a stock price of $43.32 and dividends of $1.83. The current dividend yield is 38% above 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 3.14%. The current dividend yield is 4.34% based on a stock price of $43.32 and dividends of $1.83. The current dividend yield is 399% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.71. The current P/S Ratio is 1.09 based on a stock price of $43.35, Revenue estimate for 2022 of $57,536 and Revenue per Share of $39.92. The current ratio is 37% 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 cheap. The dividend yield tests point to this as does the P/S Ratio test. All the other point to this as well except for the P/B Ratio test. Most of the other testing, except for the P/B Ratio test is based on estimate for 2022 and analysts expect a very good year for this stock in 2022.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (9) and Hold (6). The consensus would be a Buy. The 12 month stock price consensus is $58.53. This implies a total return of 39.45% with 35.11% from capital gains and 4.34% from dividends based on a stock price of $43.32.
The last 5 recommendations on Stock Chase is 3 Hold and 2 Buys. Stock Chase gives this stock 5 stars out of 5. Money Sense has rated this stock as a B or C in recent years. Adam Othman on Motley Fool says that this company remained profitable in 2022 while a lot of stocks were pushed down. Andrew Button on Motley Fool says Suncor is a former Buffett favourite that has remained cheap. Suncor reports via Yahoo Finance its fourth quarter results for 2021. Suncor reports its first quarter 2022 results via BOE Report. Suncor is one of Zacks best buy for July 2022.
Suncor Energy Inc is an integrated energy company. The company's operations include oil sands development, production and upgrading, offshore oil and gas, petroleum refining in Canada and the U.S. and the company's PetroCanada retail and wholesale distribution networks. 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-LWRK, OTC-MSIXF) ... learn more on Monday, July 11, 2022 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.
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