Suncor Energy Inc (NYSE:SU): A Quality Dividend Stock with a 4.10% Yield

When screening for dividend stocks, investors often look for companies that not only offer good yields but also show sustainable business practices. The "Best Dividend" screen uses specific filters to find such opportunities, requiring stocks to have a ChartMill Dividend Rating of at least 7, along with minimum Health and Profitability Ratings of 5. This method focuses on dividend reliability, making sure that payments are backed by solid financials and operational performance, instead of high yields that could indicate problems.

Suncor Energy Inc (NYSE:SU) appears as a candidate from this screening method, showing a mix of income generation and fundamental steadiness. The integrated energy company, with activities including oil sands development, refining, and retail fuel distribution, makes a case for dividend-focused portfolios when measured by these standards.

Dividend Reliability and Yield

The center of any dividend investment strategy is the sustainability and appeal of the income stream. Suncor's dividend profile matches the screen's focus on quality, as seen in its Dividend Rating of 7.

• Good Yield: The company provides a yearly dividend yield of 4.10%, which is higher than the S&P 500 average of 2.38%. This gives a significant income part for investors.
• Long History: A main sign of dividend dependability is a long payment history. Suncor has paid dividends for at least ten years, creating a steady record for shareholders.
• Maintainable Payouts: The dividend's sustainability is backed by a payout ratio of 49.55%. While this is somewhat high, it stays within an acceptable range, showing that close to half of the company's earnings are given to shareholders while the remainder can be used for growth or to improve the balance sheet. The review also states that dividend growth is backed by earnings growth, supporting the payout's stability.

Profitability Supporting Payouts

A company's ability to produce steady profits is key to keeping and increasing its dividend. The screening process needs a minimum Profitability Rating to exclude companies with unstable earnings. Suncor's Profitability Rating of 6 indicates sufficient operational results to back its shareholder payments.

The company shows solid margins, with a gross margin of 61.80% that is better than many in its industry. Its return figures, including a Return on Invested Capital (ROIC) of 7.92%, also put it in the top half of the industry. These numbers show that Suncor is effectively turning its resources into earnings, which then supplies the needed cash flow to pay for its dividend obligations.

Financial Health and Solvency

Dividend sustainability is directly connected to a company's financial condition. A strong balance sheet makes sure a company can handle economic declines without risking its dividend. The screen's Health Rating filter protects against high debt or cash problems. Suncor's Health Rating of 6 indicates a fairly stable financial situation.

• Controlled Debt: The company shows a low use of debt financing, with a Debt-to-Equity ratio of 0.28, which is more favorable than most in its industry.
• Good Cash Flow Coverage: A strong Debt-to-Free-Cash-Flow ratio of 1.69 indicates Suncor could pay off its debts fast with its present cash flow production, a sign of good financial flexibility.
• Sufficient Liquidity: While the Quick Ratio is a concern, the overall solvency view, including a positive direction in lowering its debt-to-assets ratio, supports the idea that the company is not strained by its financial duties.

Areas for Investor Consideration

While Suncor scores well on the chosen dividend, profitability, and health measures, a full view needs recognizing its difficulties. The company's Growth Rating is low, at 2, showing pressures like a drop in earnings per share and revenue over the last year. Future revenue growth is also expected to be unchanged. For a dividend investor focused only on income, this might be a lesser worry, but it is a factor that could affect long-term dividend growth possibility and share price gains.

For a detailed breakdown of all these figures, you can see the complete fundamental analysis report for Suncor Energy.

Suncor Energy represents a strong example of a stock that meets particular, quality-focused dividend screening standards. Its good yield, supported by a ten-year payment history, is backed by sufficient profitability and a financially sound balance sheet with controlled debt. This mix fits a dividend investment strategy that values reliability and sustainability over speculative, high-yield chances. Investors looking to repeat this research process can use the fully set up Best Dividend Stocks screen to find other possible candidates that match this description.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. All investment decisions should be based on your own research, risk tolerance, and financial objectives.