I know, coming into this article, you might be expecting me to write about renewable energy stocks. However, today that’s not the case. While there are a lot of renewable energy companies out there that investors can look to for the future of Canadian energy, there’s an older stock that could still be a significant investment. Even for that future.
So today, let’s get into why Suncor Energy (TSX: SU) could be that perfect buy.
Source: Getty Images
Into earnings
First, let’s look at the company’s recent performance, because security today means security in the future. In this case, it’s clear that Suncor stock has shown scale, integration, disciplined capital management, and a commitment to rewarding shareholders. For instance, during the most recent earnings report, the energy stock reported records in both upstream production and refinery throughput.
Suncor averaged over 808,000 barrels per day of production, and 442,000 barrels per day in refining. This is the kind of scale that gives Suncor resilience that few other energy stocks can match, even amidst weaker commodity prices. Furthermore, Suncor stock generated almost $1 billion in free funds flow, returning $1.5 billion to shareholders in buybacks and dividends. All while management showed capital discipline that should continue in the future.
What’s next
This is a good production level now, but what about that future? Suncor stock reported its 2025 capital expenditure (capex) guideline, cutting about $400 million to $5.7 to $5.9 billion in capex. This signalled a focus on free cash flow, even while a coke-drum replacement was completed ahead of schedule!
This all sets up the stock for a strong second half of the year. Looking further into the future, Suncor’s ability to keep converting record production into cash returns should remain unmatched. Its integrated model of owning both the upstream oil sands and downstream refining network gives it margin stability others don’t enjoy.
Volume and income
Amidst all this, investors can enjoy value and income. Suncor stock trades at just 12.5 times earnings, looking inexpensive compared to peers. Further, net debt is manageable at about $7.7 billion, with leverage sitting at below 15% of its capital structure to weather any future volatility.
As for the dividend, Suncor offers a yield of about 4%, with a 50% payout ratio that shows not only strength, but even the ability to increase its dividend. Great news for investors who may have gone through the cut a while back. Now, a $7,000 investment could bring in $274 for investors each and every year!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| SU | $58.55 | 120 | $2.28 | $274 | Quarterly | $7,026 |
Bottom line
Suncor is a disciplined, integrated energy stock that offers a blend of sustainable yield, buybacks, and scale. It simply is the type of energy stock that remains unmatched in the industry. It’s not a cyclical oil play, but an income-generating machine that could anchor the future of Canadian energy. Now, and potentially forever. So while renewable energy may be the future, don’t count out the stability and scale of an energy stock like Suncor.
