I’ll have to note up front that currently, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) does not own any TSX-listed stocks outright. While his company (which he will be the CEO of until the end of the year) does invest in depository receipts tied to certain Canadian firms, I’m going to have to go back in time to discuss one of his previous picks that I think remains compelling.
Buffett and the Berkshire team exited their position in Suncor (TSX: SU) in 2021, after years of adding (and subtracting) from this position. He owned the Canadian energy giant from 2013 until 2021, making a series of trades around this stock as the price of oil fluctuated by meaningful margins.
Here’s why I think Suncor still looks like a solid bet, and Buffett wasn’t wrong to open his position (but the timing of this sale may leave him unhappy).
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Total returns matter
Most Buffett followers will note the Oracle of Omaha’s penchant for dividend stocks as key pillars of his portfolio. Indeed, even many of the non-traditional picks he and his team have made in the tech sector and other spaces he has previously indicated were outside of his circle of competence paid dividends at the time.
The rationale does appear to be relatively simple on this front. Buffett and Berkshire are looking for mature companies with world-class brands in industries that are very profitable. If his holdings return capital to shareholders as fast as they can make it, even better.
Suncor’s 4% dividend yield (and dividend growth profile, even in times of turbulence in the energy sector) highlights the company’s robust business model and future profit expectations. So long as there’s a perceived floor under how low the company’s dividend yield can go, this is a stock with plenty of capital appreciation upside, over the long term as well.
A nice move since 2021
Buffett has long discussed his view that not swinging at the juiciest pitches is his greatest regret. He did own Suncor for around 8 years, so he definitely took a swing here.
That said, the fact that he sold during the doldrums of the energy market is surprising, as that’s when he’s known to ramp up his buying of such undervalued companies. I think he’d say he’d wish he held this position, though it was a small one on a relative basis to begin with. But long-term investors looking for companies with his blessing certainly do have an interesting one to consider in Suncor.
