Volatility has turn out to be the norm in power markets, however buyers nonetheless have a window to lock in high-quality money flows at cheap costs. For these prepared to look past short-term noise, fundamentals matter greater than ever.
Suncor (TSX:SU) is delivering precisely what fundamentals-focused buyers ought to need.
Right here’s why I feel it is a inventory buyers have to hone in on, and it’s not simply due to the dividend inventory’s current efficiency (see above).
Supply: Getty Photographs
What’s the bull case behind Suncor?
With report manufacturing, decrease breakeven costs per barrel, and disciplined capital returns, Suncor is a prime Canadian power producer I feel international buyers are beginning to catch onto. Impressively, this underlying enterprise mannequin is wrapped in an built-in mannequin constructed to journey out commodity cycles.
Upstream manufacturing hit a report 828,000–875,000 barrels per day in 2024. Certainly, maybe the extra spectacular issue is that refineries have continued working at or above 100% utilization, underscoring the resilience of its asset base. Suncor’s administration staff has guided to 810,000–840,000 barrels per day in 2025, sustaining targets regardless of heavy upkeep. To me, that alerts confidence in each operations and value construction
Crucially, Suncor has been quietly de-risking the stability sheet whereas ramping up shareholder returns. Internet debt has been pushed all the way down to round its said goal, and the corporate generated roughly $7.4 billion in free funds movement in 2024 alone. This offers the corporate with ample room to maintain rewarding shareholders even when oil costs wobble. In 2024, Suncor returned roughly $5.7 billion to buyers by a mixture of dividends and buybacks. Notably, one quarter alone noticed $1.7 billion in capital movement again to shareholders.
What’s the dividend angle to contemplate?
For earnings buyers, Suncor’s present dividend sits within the 3.1% vary, with a payout ratio of about 48–50%. This offers a large buffer for each dividend progress and continued buybacks. Dividend progress has resumed, and the corporate’s whole shareholder yield (dividends plus buybacks) sits comfortably above 6%. Personally, I discover that to be a compelling determine in a market the place many “bond proxies” are nonetheless struggling to develop.
I feel Suncor has loads of potential for dividend hikes down the road, given its improved money movement profile. Certainly, with oil costs surging of late, this appears like probably the greatest Canadian power shares to purchase this month.
