23Q4 Earnings Investor Package, and ThoughtsLooking at the results not only on a quarterly but on a yearly basis, I'm impressed what Suncor has been able to achieve even in this present low oil price environment. If oil hits the fan, this will be a monster.
We have seen the earnings report, but also here's the link to the 22Q4 Investor Package:
https://sustainability-prd-cdn.suncor.com/-/media/project/suncor/files/investor-centre/investor-relations-presentations-2022/2022-q4-suncor-energy-investor-presentation-en.pdf?modified=20230214232226&_ga=2.198810281.705806561.1676464114-416292859.1676464114 The power this company has to make substantial dividend payments is huge, if it wanted to. From all the cash it generates at present, only 20% of cash is paid as dividends, 40% is share buybacks, and 40% is going to debt repayments.
To me, using another measure, this means the company could have a five fold dividend increase overnight if it wanted to. I ask myself, what stock price would this company have if it paid a $10.40 dividend per year? I think it is quite undervalued, and this is even before any additional share buybacks which are about to accelerate...
Around the end of 23Q1, next month, as the 0.52 quarterly dividend stays the same, the company will reach a 12B$ net debt threshold, and will move from 50/50 buyback to debt payment ratio, to 75/25 ratio, slowing the debt repayment pace, but increasing the share buybacks. Ultimate debt level it will hold will be $9B, where debt payment will stop, and share buybacks will increase to 100%. (one part dividend, four parts share buyback)
As 2022 realized the buyback and cancellation of 8.2% of the float, in 2023 it should be able to buy back 50% more shares than that, therefore we could expect 12.3% of the float to be cancelled by NCIB, and SCIB if the share price does not skyrocket during the next year. A higher share price means the same money will be spent on share buybacks, but less shares will be bought.
In just 12 months time, all things equal, the float should be 87.7 % of what it is now. This means a lot less shares out there to share the funds earmarked to go towards dividends, therefore forthcoming dividend increases must be expected of the same percentage, to match less float out there.
For me, I'm very happy with maximizing buybacks to minimize tax exposure. To each his own.
As the other companies are doing similar things, there may be better opportunities out there. For me, I am happy to see things are going according to plan at SU for a change, and I continue to hold as I see light at the end of the tunnel.