Suncor Stock: The Dividend Test I’d Use When Oil Prices Swing

An oil dividend can look safest when the oil market is doing all the work.

That’s exactly when I’d make the test tougher.

I want to know whether a company has cash left after maintaining its operations, how much it promises shareholders, and what happens when the good prices leave.

A fresh dividend increase is welcome, with the harder decision just behind it.

That’s why today we’re looking at this energy giant.

Start after the necessary spending An energy producer’s operating cash flow still has to fund investment.

Wells, plants, maintenance, and replacement work aren’t optional decorations.

Comparing the dividend with cash after capital spending gives a clearer sense of what remains for shareholder payments and debt.

Suncor Energy (TSX: SU) combines oil production with refining and the Petro-Canada retail network.

Refining can help when cheaper crude improves the margin on finished products.

It doesn’t provide complete protection, since weak fuel demand or operating problems can pressure the downstream business too.

Its November 3 results reported third-quarter free funds flow of about $5.2 billion.

That’s cash after capital investment under Suncor’s definition.

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