Oil sands giant Suncor (TSX:SU) has been among my top Canadian stock picks for some time. That’s been true in the pandemic era, during the recent tariff turmoil, and during other periods in which energy stocks didn’t perform as well as the rest of the market.
In my view, the Canadian energy sector is a relatively stable place to invest. There are a few players dominating this space, with Suncor’s market share continuing to lead the way.
So, for investors who are bullish on the future of this space, here’s why I think Suncor could look more attractive now than in years past.
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Suncor’s strong fundamentals provide investors with confidence
I think one of the most important attributes of any potential investment that needs to land properly for investors to earn a meaningful return over the long term is a company’s fundamentals. On this front, Suncor is a real winner.
I’ve long discussed Suncor’s value as a top dividend stock holding for long-term investors. That’s as true today as it’s been in the past, given the company’s 4.5% dividend yield at the time of writing.
But it’s the underlying fundamentals that drive this yield that are more important to many investors. Suncor’s record-breaking first-quarter (Q1) results highlighted the strength of the company’s operational efficiency initiatives and its commitment to growing its output, which hit 483,000 barrels per day.
With strong free funds flow of roughly $1.9 billion this past quarter, the company’s dividend is well-covered, and this is a stock that’s positioned for greater growth — that is, with a new seemingly energy-friendly prime minister in place in Mark Carney.
Analysts think this stock is heading higher
Most analysts who cover Suncor believe the company’s path, in terms of its share price, is most likely higher over the next year. This is a company that has seen a number of recent upgrades in its recent push to reduce operational costs and improve margins. This should improve the company’s cash flow prospects, particularly during weak commodity price cycles.
In my view, the analysts are likely to be proven right on Suncor. The company is making all the right moves to improve its standing in the North American energy space. And with energy independence on this continent a continuing concern as a matter of national security, I think Suncor could be an intriguing way to play this theme over the long run.
