RE:RE:Suncor doubles dividendCommr51bkd wrote
Wouldnt doubling it still leave us with no dividend? But seriously, what is the rush for dividends. I would rather see some share buybacks before reinstituting dividends. At least while the P/E is under 3!
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Yes double of nothing is still nothing. Everbody likes getting cash dividends in their account every month myself included. We also have to realize that the VET shareprice has nearly doubled in the last couple months so shareholders may not be getting dividends but have had a large increase in the shareprice to console themselves.
VETs debt problems started in 2014 -15 when oil prices collapsed and then averaged in the $50 range for the next 5 years and then collapsed to nothing when Covid came along last year. The fact is with oil prices in the $50 range for 5 years VET was paying out all their cashflow over $400 million Cdn. per year in dividends. That is well aprox. $2.1 billion Cdn. payed out in dividend over those 5 years. They had no money left over for debt reduction or buying more assets. All VET did over those 5 years was spin their wheels and burn up aprox. 100 000 barrels per day of oil resources. In hindsight the Covid collapse in oil prices may be the best thing that every happened to VET as it forced them to stop paying that huge dividend and start paying down debt.
Now after all the mostly self inflicted problems this company has had over the last 6 or 7 years the new management with the huge help of much higher oil prices has got things going in the right direction for VET. Debt is dropping rapidly and cashflow is huge at these oil and gas prices.
The current high oil prices have made VETs debt a lot smaller compared to its current high cashflow. At the same time although it is looking good for oil and gas prices right now VET should take the good fortune that they now have and get the debt problem under control once and for all. The current high cashflow should be mostly used to get down quick.
By the end of this year VET should have debt down to around $1.5 to $1.6 billion Cdn. At current oil and gas prices VET should have cashfow next year of aprox $1.1 billion Cdn. After capex they should have aprox. $700 million in free cashflow. If oil prices stay around this level VET could eliminate all their debt in in less than 2.5 years from today.
If oil prices cooperate and VET does have $700 million or even $600 million in free cashflow next year they could easily pay a 60 cent per year dividend which would cost aprox. $100 million Cdn. per year leaving aprox. $500 million per year for debt reduction, share buybacks and asset purchases. As debt come down next year they could slowly increase the dividend.
Anyway you look at it the future for VET is looking a lot better than it has in many years when oil prices were over $100 and VET was a market darling with a shareprice over $50.
Soon VET will be a market darling once again hopefully with a shareprice to match. The quarterly results in the next 10 days or so should set us on our way.
Good luck to all.