Suncor Energy Inc. (TSX:SU)(NYSE:SU) reported its second-quarter earnings for fiscal 2022 after markets closed on August 4, 2022. All the while, oil prices have been declining in recent weeks, causing a downturn across the energy sector. Investors interested in the energy industry might be wondering whether Suncor stock is a good buy to consider.
This dividend stock lost its status as a Canadian Dividend Aristocrat when it slashed its dividends by more than half to protect its financial position amid the pandemic. Last year, the energy sector witnessed a resurgence as restrictions lifted, and pent-up travel demand led to soaring energy demand.
Today, we will take a look at what is happening in the oil market and Suncor’s earnings results to see whether it could be worth adding to your portfolio for its shareholder dividends.
Oil prices have been declining in recent weeks. After hitting a monumental high of US$120 per barrel in March and early June, WTI (West Texas Intermediate) oil trades for around US$89 per barrel at the time of this writing. The substantial drop in crude oil prices could continue to plunge even further.
In a bid to drive down prices, U.S. President Biden has released 180 million barrels of oil from the U.S. Strategic Petroleum Reserve. The Biden administration is also pressuring OPEC (Organization of the Petroleum Exporting Countries) and US oil producers to ramp up production.
Analysts anticipate oil demand to remain high and continue growing, even if a recession happens. Industry executives believe growing ESG pressure to reduce emissions and a lack of investment in new production could limit the industry’s ability to meet growing global demand.
If pressure continues to intensify in the energy industry, oil prices could rise again, and there is reason to believe that it could reach US$100 per barrel again.
Suncor has undergone some changes in recent weeks. Its CEO left the company due to pressure from an activist investor, and its board has seen some reshuffling. To unlock value, Suncor might have to sell its retail division, and analysts anticipate the company could receive as much as $10 billion through the sale.
Analysts expected Suncor to post strong numbers in its second-quarter earnings report, and it did. The company’s adjusted funds from operation increased to $5.34 billion. It was the highest in the company’s history and substantially higher than its $2.36 billion adjusted funds from operations in the same quarter last year.
Its adjusted earnings increased to $3.81 billion, compared to $722 million year-over-year. The company’s oil sand operations production increased to 641,500 barrels per day, compared to 615,700 barrels per day for the same period last year.
Suncor stock trades for $39.46 per share at the time of this writing, and boasts a healthy 4.76% dividend yield. It’s currently down by 26.40% from its 52-week high in June 2022.
The company also announced an agreement for the sale of its Exploration and Production assets in Norway, a deal worth $410 million, which could significantly boost its liquidity position. Based on the energy industry’s outlook, Suncor could be an excellent addition to your investment portfolio.