Suncor (TSX:SU) Stock: A Dividend Raise Is Coming Soon!

Suncor (TSX:SU)(NYSE:SU) stock may delight Motley Fool investors with a dividend raise after consecutive growth in revenue!

| More on:

Energy stocks are finally seeing a recovery during the last few months. And it’s been a long road from the bottom. After climbing to all-time highs, companies like Suncor Energy (TSX:SU)(NYSE:SU) began to fall, and fall … and fall again. With the Organization of Petroleum Exporting Countries (OPEC+) cutting back production, and oil and gas prices plummeting, Suncor stock and others were in dire straits. Then the pandemic hit.

If things weren’t bad enough, production came to a standstill with COVID-19 causing companies to cut back even further. This included Suncor stock, and the company was forced to cut its dividend by more than half back in May 2020. This came after a multi-billion-dollar loss reported by the company.

But all this could be about to change, according to analysts.

A rebound underway

With pressure coming in from all sides, energy stocks across the board had to take a hard look at where they were spending cash. Suncor stock realized the company wasn’t covering its capital expenditures from its cash from operations, and thus the dividend became a prime target. Companies were forced to scale back spending and become disciplined cash machines if they were going to survive.

And Suncor stock hasn’t just survived; it now has a strong balance sheet, putting it in a solid position with a rebound in oil and gas prices underway. Not only is Suncor stock able to cover capital expenditures, but it’s also able to cover its current dividend with cash to spare! This is leading to pressure to increase the dividend, as the company has already reinstated a buyback program.

Suncor stock recently proved it’s in the midst of a rebound, generating $2.1 billion in funds from operations (FFO) during the quarter ending March 31. The company reported $746 million in operating earnings compared to a loss of $421 million the year before. The best part? It also posted $821 million in net earnings compared to a $3.5 billion loss in the first quarter of 2020, which led to the dividend cut.

What now?

The company continued this strong growth into the next quarter, so it’s likely we’ll hear some news about a dividend increase. Meanwhile, it’s not like Motley Fool investors aren’t receiving anything for your patience. Shares Suncor stock have already risen by 20% in the last year. Its price-to-book ratio of 1.1 makes it a steal at today’s share price, especially considering the average potential upside of 48% predicted by analysts in the next year.

On top of that, you’ll receive a dividend yield today of 3.21%, and that’s not nothing. Meanwhile, Motley Fool investors can pick up the stock on the cheap and potentially see dividends double before the year is out! Oil and gas will continue to grow in demand, albeit with fluctuations as the world tries to get out of the pandemic. But when that happens, Canada’s largest fully integrated oil and gas producer is likely to make significant revenue — even more so since it’s learned how to cut back and save cash.

Motley Fool investors looking for a value stock to buy and hold for decades can definitely consider Suncor stock at the top of their list. But even better, they can also likely look forward to a bump in dividends in the coming year, if not sooner.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Energy Stocks

construction workers talk on the job site
Energy Stocks

Best Stock to Buy Right Now: Baytex vs Suncor?

Suncor and Baytex stocks both look like solid companies offering growth and dividends. But which is the better buy?

Read more »

bulb idea thinking
Energy Stocks

3 Incredibly Cheap Energy Stocks to Buy Now

Energy stocks are trending upwards on the back of several key factors. And these three continue to be top cheap…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Should You Buy Freehold Royalties Stock for its 8% Yield?

Freehold Royalties is a TSX dividend stock that offers shareholders a forward yield of 8%. But is the energy stock…

Read more »

Muscles Drawn On Black board
Energy Stocks

Is Suncor Energy Stock a Good Buy?

Suncor is on a roll in 2024. Are more gains on the way?

Read more »

profit rises over time
Top TSX Stocks

3 Reasons to Buy Enbridge Like There’s No Tomorrow

Have you considered buying Enbridge (TSX:ENB)? Here are 3 reasons to buy Enbridge today for lasting growth and income.

Read more »

oil pump jack under night sky
Energy Stocks

Is CNQ Stock a Buy for its 4.5% Dividend Yield?

CNQ stock is one of the best options out there for dividend growth. But what about value? Let's take a…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Imperial Oil stock is in a precarious position, so what should investors consider as we head nearer to 2025?

Read more »

construction workers talk on the job site
Energy Stocks

Is Suncor Stock a Buy, Sell, or Hold for 2025?

Suncor Energy stock is trading at its decade-high on uncertainty in the oil market. Should you buy, sell, or hold…

Read more »