lebur

Dividend Analysis of Suncor Energy

Consider Canadian Oil Sands. It currently pays $2.20/yr, selling in CA for about $35. There seems to be a very high likelihood that, by the end of December, the dividend will rise again, as it has repeatedly done in recent years. Production is still rising compared with former years, and is likely to increase as much as 10% more in the next twelve months. Its increased earnings are NOT simply the product of higher prices for oil. Production increases would account for something like a 40% increase in cash flow, even if oil stayed well below $70/bbl. Its market cap is way below that of SU, but the partnership, SYNCRUDE, in which COS is about a 37% partner, is larger than SU with reserves equally long if not longer, extending for some 25-40 years at current rates of production. Even the latest Alberta royalty regime, to which both COS and SU have a long-standing legal exception lasting for many years, willl not have a material effect on future cash flow or dividends even if COS were to agree to adhere to it in it entirety. Despite these considerations, despite the acceleration of crude prices far beyond the baseline used by the company to project its future prospects, COS sells at a historic high right now in terms of capitalizing its market price. A return to fomer levels of capitaliztion would approximately double the price of the stock before too long!