Is It Wise to Buy Suncor Energy Stock Ahead of Its Q3 Earnings?

一直保持派息并且不断增长,这只能源股能带来高额被动收入
Published on: Oct 25, 2024
Author: Caroline Kong

Suncor Energy ( TSX:SU ), as one of the most highly regarded energy stocks and dividend stocks on the TSX, has a market capitalisation of C$68.8 billion and an enterprise value of C$82 billion, generating more than 150% returns over the past two decades, and nearly 310% after adjusting for dividend reinvestment.

The company has reported strong results for the past two consecutive quarters. If Q3 results beat analysts’ expectations, it may be a smart move to consider buying this stock, which offers a dividend yield of nearly 5%.

For the second quarter ending in June, Suncor Energy reported adjusted funds from operations of C$3.4 billion and earnings per share of C$2.65. Over the past two quarters, the company’s adjusted funds from operations totalled C$6.6 billion, or C$5.11 per share. Due to its continued focus on cost optimization, Suncor’s operating expenses reduced by C$250 million to C$3.2 billion in the second quarter.

Suncor reported free funds flow for the second quarter of C$1.4 billion, or C$1.05 per share, representing a payout ratio of 52 per cent. Taking into account the quarterly dividend of C$0.545 per share during the second quarter, it paid C$698 million in dividends to shareholders and repurchased C$825 million worth of shares.

In the first half of 2024, the company returned C$2.5 billion to shareholders through dividends and shares repurchase. Helped by the commitment on using free cash flow to reduce debt on its balance sheet, Suncor’s net debt has decreased by C$500 million to C$9.1 billion over the past three months

Is Suncor Energy Stock Worth Buying Right Now?

Over the past two quarters, Suncor’s production has increased by an average of 62,000 barrels per day (bpd) to 430,000 bpd, up 16% year-over-year. At the same time, refining utilization increased to 95% from 82% a year ago, which is the best half-year in the company’s history.

The company continues to invest in capital expenditure, which will contribute to long-term growth in cash flow, earnings and dividends. Management expects to increase production by a further 100,000 barrels per day by 2026, with annual capital flows growing by more than C$3 billion over the period. The growth of existing assets and other expansion projects will mean that the company will not be investing significant amounts of money in new bitumen development projects over the next five years.

As Suncor Energy stock is offering a dividend yield of nearly 5%, the current P/E ratio of 13x makes this energy stock look relatively cheap. However, a challenging macro environment and narrowing earnings estimates could mean that buying this stock in October 2024 is a high-risk investment.

Bay Street analysts remain bullish on the stock, expecting Suncor Energy stock to gain more than 10% over the next 12 months. After adjusting for the dividend, the total return over the next year could be close to 15 per cent.

Canadian Stocks Dividend Yielding Stocks Financial Reports Oil & Gas