Suncor (TSX: SU) has been on an upward trend for the past three months. Investors who missed the rebound off the April plunge are wondering if Suncor stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
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Suncor share price
Suncor trades near $53 per share at the time of writing, compared to the 2025 low of around $45. The stock bounced around the $45 to $58 range over the past year, rising and falling more than 10% several times. Savvy traders have had an opportunity to make some good money on the volatility. Buy-and-hold investors are up about 3% over the past 12 months.
Oil market outlook
Volatility in the oil market is largely the cause of the choppy movements in the share price. West Texas Intermediate (WTI) trades near US$67 per barrel at the time of writing. It was above US$80 last year and slipped below US$60 in April on the tariff shock, but then rallied on geopolitical risks in the Middle East.
Analysts broadly expect the oil market to be in a surplus position through 2026. A weak economy in China and risks of a global economic slowdown triggered by American tariffs could hold back demand growth. At the same time, OPEC is planning to increase output in a bid to regain market share. This is expected to occur as non-OPEC producers, including Canada and the United States, increase supply.
Shocks to the market could certainly drive prices higher. Traders are concerned that Iran might close the Strait of Hormuz, the narrow channel between Iran and Oman, where an estimated 20% of oil supply travels on its way to global buyers. A wave of positive trade deals between the United States and major trading partners could also ignite a rally in oil prices if markets anticipate a strong economic bounce in China and the broader global economy.
Investors should brace for ongoing turbulence in the oil market over the coming months.
Suncor operations and earnings
Suncor is known for its oil sands production operations, but the company also has refineries and a network of Petro-Canada retail locations. The integrated business structure historically made Suncor a top pick among energy investors due to the hedge the downstream operations provide when oil prices decline. A dividend cut in 2020, along with safety and efficiency issues, however, led to an investor exodus during the pandemic.
A new CEO took charge in 2023. Since then, Suncor has improved its performance.
The company reported solid first-quarter (Q1) 2025 results with production, refining throughput, and refined product sales all hitting record Q1 levels. Operating expenses fell during the quarter compared to the same period last year, even as output increased. Year-over-year net earnings rose, but adjusted operating earnings came in a bit lower than Q1 2025 due to lower commodity prices.
Suncor has done a good job of strengthening the balance sheet in the past couple of years. Net debt is now below the $8 billion target. This means Suncor will return 100% of excess cash to shareholders through share buybacks, after capital expenditures and dividends are paid. The board raised the dividend by 5% for 2025 when it announced the Q4 2024 results earlier this year. Investors who buy Suncor at the current level can get a dividend yield of 4.3%.
The completed expansion of the Trans Mountain pipeline in 2024 provided Suncor with added access to international markets. Alberta is pushing for another pipeline to the coast as part of the effort to reduce Canada’s reliance on the United States. If a new pipeline is approved and gets built, Suncor should benefit.
Time to buy?
Suncor has made good progress on its turnaround plan and is positioned well to benefit from any new access to international markets. Oil bulls might want to consider buying the stock at this price point and look to add on new downside. Existing shareholders should probably stick with their position. You get paid a decent dividend yield right now, and the distribution should continue to grow.
