Forget Suncor Stock: This Dividend Heavyweight is the Better Buy Today

Suncor stock (TSX:SU) has a supported dividend for now, but the dividend stock isn’t likely to remain so strong in the next decade.

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Dividend income can be a saviour. Whether you’re using the cash to help create compound interest towards your future or using it immediately in retirement that money can be a necessary part of your income.

One investor sector that investors have used for decades to help fund their retirement and investments is energy dividend stocks. These have been the go-to, as we’ll always need energy. And one of the best dividend stocks out there has been Suncor Energy (TSX:SU).

No longer the case

The problem is that Suncor stock is no longer the sure thing it once was. Whether in the immediate or distant future, the energy stock poses numerous issues for those seeking dividend stocks.

First off, Suncor Energy’s business is heavily dependent on the price of oil, which is notoriously volatile. Fluctuations in oil prices can significantly impact the company’s revenue and, consequently, its ability to maintain or grow dividend payments.

Furthermore, the oil and gas industry faces increasing regulatory pressures and potential liabilities related to environmental concerns. Policies aimed at reducing carbon emissions and transitioning to renewable energy sources can impose additional costs on Suncor and create uncertainty about its future profitability.

Then there is the issue of high capital investments, causing a limit to the ability to return cash to shareholders. This even turned into a dividend cut in 2020 when oil prices plummeted. With all that going on, there is another dividend stock I would consider a far better option on the TSX today. And one that offers just as much growth and income.

Consider goeasy instead

While energy stocks are certainly always needed, so are loans. It’s something we’ve seen pretty much since the dawn of time. However, here in Canada the Big Six Banks have been the ones carrying a lot of these loans. That is, until more recently.

Goeasy (TSX:GSY) may have come around in the 1990s, but in the last few decades it’s gone from loaning out home appliances to offering non-prime loans as well. Goeasy stock operates in the financial services sector, providing consumer loans and financial services through its easyfinancial and easyhome divisions. This business model tends to have more predictable cash flows compared to the highly cyclical nature of the oil and gas industry. 

Now, goeasy stock has a track record of consistently increasing its dividend payments. Companies that demonstrate a commitment to growing their dividends over time are often attractive to long-term investors seeking reliable income.

Goeasy stock has also proven to be a significant growth opportunity, with shares surging this year alone. As interest rates come down, more loans come in. And when interest rates are up, Canadians seek out lower rates. So no matter what, goeasy stock is a win.

Bottom line

Suncor stock no longer offers the dividend stock premium status it once did. Sure it holds a 4.2% dividend yield, and the dividend currently looks well funded. But this will likely change in the coming years and decades for long-term holders. And meanwhile, it share price has hardly moved over a five-year period.

Then there’s goeasy stock, seeing shares surge while still offering a 2.5% dividend yield and with a payout ratio that is covered just as well as that of Suncor stock. But with far more future growth to offer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in goeasy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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