Suncor is an “underrated” cash machine: analyst – .

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Suncor is an “underrated” cash machine: analyst – .


Suncor said on Wednesday it was reducing its coveted dividend to 2019 levels. (GETTY)

Suncor Energy’s (SU.TO) (SU) plan to double its payout to shareholders following a strong quarter boosted by rising oil prices pushed company shares to their highest level since June Thursday . An analyst sees Suncor’s latest financial results as a “turning point” for the stock, which has so far lagged behind in this year’s energy recovery.

The board of directors of the Calgary oil producer and refiner on Wednesday approved a 100 percent dividend increase to $ 0.42 per common share, from $ 0.21 per share. The company says the increase will take effect on December 24, 2021. In addition to bringing its dividend back to 2019 levels, Suncor is also increasing its share repurchase plan to about seven percent of its free float, or 107 million dollars. actions.

“Since the start of 2021, we have returned $ 2.6 billion to our shareholders through share buybacks and dividends, and have reduced net debt by $ 3.1 billion, demonstrating significant progress towards consolidating our balance sheet and meeting our capital allocation targets for the year, ”Suncor CEO Mark Little said in a press release on Thursday.

The company posted net income of $ 877 million, or $ 0.59 per share, in its fiscal third quarter 2021, compared with a loss of $ 12 million, or $ 0.01 per share, a year earlier. Operating funds more than doubled in the quarter to $ 2.64 billion, from $ 1.17 billion the year before.

“We believe this [fiscal third quarter 2021] could mark a turning point for shares of Suncor, which have lagged significantly behind the general rise in energy since the start of the year, ”Raymond James analyst George Huang wrote on Thursday in a commentary. note to customers.

“Behind the 100% increase in Suncor’s dividend from [fiscal third quarter 2021] is what we believe to be an underrated structural improvement story that quietly generates a very attractive cash return profile for long-term investors. “

Huang notes that Suncor shares have climbed 32 percent year-to-date, well behind the 71 percent jump in the iShares S & P / TSX Capped Energy Index ETF (XEG.TO) over the past year. same period. The exchange-traded fund holds a representative sample of Canadian oil companies, including Suncor.

Huang says Suncor’s rising dividends are “supported by very visible cost reductions the company will achieve over the next 12 months.” It maintains an “Outperformance” rating on Suncor shares, with a price target of $ 43.

The stock rose 9.64 percent Thursday to $ 30.94 by 11:22 a.m. ET.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on twitter @jefflagerquist.

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