Is it a good company at a reasonable price? Energy companies are not my favourite investments. They are too volatile. I have around 1% of my portfolio in Energy. At the present time, the stock price seems relatively cheap. So, money can probably be made on this stock. However, I would not consider any energy stock a long term hold. Energy stock investing should also be done with money you cannot afford to lose.
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. However, I am changing the spreadsheet into one for SU only. Note that the merger took place more than 10 years ago.
When I was updating my spreadsheet, I noticed that all items but the stock price seems to be growing.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 81.71% | 12.69% |
| 5 | EPS Growth | 143.66% | 19.50% |
| 5 | Net Income Growth | 103.61% | 15.28% |
| 5 | Cash Flow Growth | 74.88% | 11.83% |
| 5 | Dividend Growth | 46.88% | 7.99% |
| 5 | Stock Price Growth | -31.25% | -7.22% |
| 10 | Revenue Growth | 51.41% | 4.24% |
| 10 | EPS Growth | 264.80% | 13.82% |
| 10 | Net Income Growth | 226.16% | 12.55% |
| 10 | Cash Flow Growth | 77.26% | 5.89% |
| 10 | Dividend Growth | 276.00% | 14.16% |
| 10 | Stock Price Growth | -3.00% | -0.30% |
If you had invested in this company in December 2012, for $1,014.01 you would have bought 31 shares at $32.71 per share. In December 2022, after 10 years you would have received $386.73 in dividends. The stock would be worth $983.63. Your total return would have been $1,370.36. This is a total return of 3.49% per year.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $32.71 | $1,014.01 | 31 | 10 | $386.73 | $983.63 | $1,370.36 |
The current dividend yield is good with dividend growth low, but usually the growth has been moderate to good. The current dividend yield is good (5% to 6% ranges) at 5.35%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 4.05%, 3.18% and 3.10%. The dividends are currently increasing at a low rate (below 8%) at 7.9%. The last dividend increase was in 2023 and it was for 10.6%. Dividend growth over the past 10 years is 14.2% which is a moderate (8% to 14% ranges) and this is close to good (over 15%).
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for Earnings per Share (EPS) is 29% with 5 year coverage at 69%. The DPR for 2022 for Adjusted Funds from Operations (AFFO) is 14% with 5 year coverage at 24%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 23% with 5 year coverage at 36%. The DPR for 2022 for Cash Flow per Share is 14% with 5 year coverage at 19%. The DPR for 2022 for Free Cash Flow (FCF) is 25% with 5 year coverage at 48%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 28.79% | 69.03% |
| AFFO | 14.41% | 23.99% |
| AEPS | 22.54% | 35.58% |
| CFPS | 13.89% | 19.48% |
| FCF | 24.75% | 48.16% |
Debt Ratios are fine. The Long Term Debt/Market Cap ratio for 2022 is good and low at 0.23. The Liquidity Ratio for 2022 is low at 1.13, but if you add in Cash Flow after dividends it is good at 2.15. The Debt Ratio for 2022 is fine at 1.87. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.15 and 1.15.
| Type | Ratio '22 | Ratio Curr |
|---|---|---|
| Lg Term R | 0.23 | 0.19 |
| Intang/GW | 0.08 | 0.07 |
| Liquidity | 1.13 | 1.11 |
| Liq. + CF | 2.15 | 1.96 |
| Debt Ratio | 1.87 | 1.89 |
| Leverage | 2.15 | 2.12 |
| D/E Ratio | 1.15 | 1.12 |
The Total Return per year is shown below for years of 5 to 27 to the end of 2022 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 7.99% | -3.62% | -7.22% | 3.60% |
| 2012 | 10 | 14.16% | 3.49% | -0.30% | 3.80% |
| 2007 | 15 | 16.51% | -1.20% | -3.51% | 2.31% |
| 2002 | 20 | 16.68% | 7.73% | 4.75% | 2.98% |
| 1997 | 25 | 13.19% | 9.73% | 6.80% | 2.93% |
| 1995 | 27 | 12.91% | 13.30% | 9.60% | 3.70% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.34, 7.99 and 9.65. The corresponding 10 year ratios are 12.10, 14.01 and 15.92. The corresponding historical ratios are 12.10, 14.66 and 17.33. The current P/E Ratio is 6.93 based on a stock price of $38.90 and EPS estimate for 2023 of $5.61. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 6.86, 8.65 and 10.44. The corresponding 10 year ratios are 9.37, 11.43 and 13.48. The current Ratio is 6.88 based on a stock price of $38.90 and AEPS estimate for 2023 of $5.65. 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 also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Funds from Operations Ratios are 5.30, 5.98 and 6.66. The corresponding 10 year ratios are 5.48, 6.77 and 7.98. The current Ratio is 3.45 based on a stock price of $38.90 and AFFO estimate for 2023 of $11.29. 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 $61.87. The 10-year low, median, and high median Price/Graham Price Ratios are 0.78, 0.93 and 1.17. The current P/GP Ratio is 0.63 based on a stock price of $38.90. 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 1.29 based on a stock price of $38.90, Book Value of $39,949M and Book Value per Share of $30.11. This ratio is 5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2023 of $32.30. This gives a ratio of 1.20 and a Book Value of $42,859M with a stock price of $38.90. This 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 P/CF Ratio is 3.85 based on Cash Flow per Share estimate for 2023 of $10.10, Cash Flow of $13,402M and a stock price of $38.90. The current ratio is 41% 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 3.10%. The current dividend yield is 5.35% based on a stock price of $38.90 and dividends of $2.08. The current dividend yield is 72% 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 3.18%. The current dividend yield is 5.35% based on a stock price of $38.90 and dividends of $2.08. The current dividend yield is 68% above 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 1.71. The current P/S Ratio is 1.11 based on Revenue estimate for 2023 of $46,464M, Revenue per Share of $35.02 and a stock price of $38.90. The current ratio is 35% 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 are saying this and it is confirmed by the P/S Ratio test. Most of the other tests is saying the same thing. The exception is the P/B Ratio tests and they say the stock price is reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (7) and Hold (7). The consensus would be a Buy. The 12 month stock price consensus is $50.76. This implies a total return of 35.84% with 30.49% from capital gains and 5.35% from dividends.
Most analyst on Stock Chase think this stock is a buy. One feels it could fall more and another likes CNQ better. Stock Chase gives this stock 5 stars out of 5. Joey Frenette on Motley Fool thinks this is a good dividend stock for your TFSA. Rajiv Nanjapla on Motley Fool likes CNQ better than this stock. The company put out a press release via Newsfile about their 2022 year end results. The company put out a press release via Newsfile about their first quarter of 2023 results.
Simply Wall Street via Yahoo Finance says the fair value for this stock is $48.81 CDN$, almost 22% below the current cost. Simply Wall Street has 2 warnings of earnings are forecast to decline by an average of 14.8% per year for the next 3 years; and unstable dividend track record. Simply Wall Street gives this stock 3 and one half stars out of 5.
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 Petro-Canada retail and wholesale distribution networks. Its web site is here Suncor Energy Inc .
The last stock I wrote about was about was Jamieson Wellness Inc (TSX-JWEL, OTC-JWLLF) ... learn more. The next stock I will write about will be TMX Group Ltd (TSX-X, OTC-TMXXF) ... learn more on Monday, July 10, 2023 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.
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