Company Description
Suncor Energy Inc. is an integrated energy company headquartered
in Calgary, Alberta. Suncor's oil sands business, located near
Fort McMurray, Alberta, extracts and upgrades oil sands and
markets refinery feedstock and diesel fuel, while operations
throughout Western Canada produce natural gas. Suncor operates a
refining and marketing business in Ontario with retail
distribution under the Sunoco brand. U.S.A. downstream assets
include refining operations in Colorado and retail sales in the
Denver area under the Phillips 66 brand. Suncor's common shares
(symbol: SU) are listed on the Toronto and New York stock
exchanges.
[Source: Company Press Release]
Reasons to Invest:
Suncor Energy Inc (NYSE:SU) has been trending higher for the past
2 years, setting new all time highs this past March, and gliding
through an uptick regression channel with ease and grace.
During the first quarter of this year revenues for Suncor
increased by 6 percent to C$1.8 billion. However their net
income decreased by 42%, or C$215 million, due to an increase in
unrealized foreign exchange losses on long-term debt.
While a decrease in net income by nearly half their normal levels
is usually not a sign of good things coming, if you can look past
this fact, you might be enlightened to note that the company is
prospecting a dividend percentage growth rate of 13.24 percent
over the next year, 4.23 percent over the next three years, and
2.52 percent over the next five years.
Furthermore, the stock is dirt cheap in respects to most other
energy companies, and $100 dollars will get you approximately
four shares at SU's current trading range. The company asks that
you invest at least a hundred dollars per quarter in order to
keep the DRIP active, but it would seem that this $100 bill would
buy you more ownership than most of the DOTW's that I have posted
over the past year (based upon price alone).
The company also expects an EPS percentage (Earnings Per Share)
growth rate of 40.10 percent over the next year, 51.64 percent
over the next three years, and 36.35 percent over the next five
years. These are pretty hefty EPS expectations, but should these
forecasts be correct, we could be seeing our cheap DRIP plan turn
more expensive to own come a couple of years. Which only means,
the more we invest now, the more money it could hypothetically be
worth in a couple of years.
As I sifted through the news surrounding Suncor I found an
interesting article by another investment analyst, by the name of
John Maloney of BusinessWeek Online. Mr. Maloney speculates that
a barrel of oil will stay above $30. He went on to note that it
costs Suncor roughly $8 to produce a barrel of oil, while it
costs the major oil producers closer to $10 a barrel. He expects
Suncor to reach the 35 or 40 range within a year, and further
speculates that he expects SU earnings to be $4 a share in 2005
(this is way higher than the estimates). His calculations note
for every $1 increase in the price of oil, adds an additional
$0.22 per share to Suncor's cash flow. Maloney reported that
Suncor has produced 10 percent more oil per year, for the last
decade, and believes that the company will be drilling 500,000
gallons a year in seven years. At the end of the article,
Charles Maxwell (oil maven) of Weeden Securities Firm notes
"Suncor is the oil stock to own... [Suncor] will be No. 1 in
production growth."
I read that Suncor estimates that their production will continue
to grow at ten percent per year for the next four years, in an
article by Salim Haji, produced on June 17th. The significant
thing to note about this is that neither BP, RD, CVX, or XOM have
averaged more than a three percent growth in oil production for
the past five years. If the oil giants can't continue to produce
more oil than these underdog oil producers such as SU, PZE or E,
then we may see these underdogs start taking the limelight as
crude oil prices remain in the $30 per barrel range.
Suncor's weekly chart looks fundamentally solid. While the past
two weeks have been in the red for this energy producer, the
stock is still trending nicely in an October 2002 regression
channel. Actually if you went all the way back to when the
company was listed on the NYSE, you could see that the stock has
been in a regression channel since being listed at $6.50 in 1997.
That is of course with the exception of Dec 03-May 04 when the
stock popped over the top of this initial regression channel. In
fact, Suncor has just recently made a run at the top of this
channel in the past few weeks, closing just over the top bar of
the channel, which has been in the $25 range for the past few
months.
The weekly MACD indicator is showing signs of a fresh bullish
crossover, yet the bearish bars remain over the bullish bars by
.10 points. The Stochastics indicator has just sparked a fresh
buy signal in neutral territory.
The monthly chart has Suncor just over the top of that 1997
regression channel. The MACD and Stochastics indicator shows SU
on a strong buy signal in neutral territory.
The only thing that I see different on the Quarterly chart is
that the stochastics indicator is on a sell signal, albeit in
overbought territory, where the stock has basically consolidated
since being listed.
Suncor Energy Inc offers one of the smallest dividends ever
featured here on the Drip of the Week column, but due to the high
expectations and my personal speculation, I still feel the
investment will come back ten fold. Their annual dividend is
$0.1751 per share owned, which tallies out to an annual yield of
0.67 percent.
This ends another exciting episode of the DripAdvisor.com Drip of
the Week. Stay tuned next week, as we will spotlight another
stock worthy of the DripAdvisor.com limelight.
Until Next Week,
Nich Sheldon
Editor
www.dripadvisor.com
questions@DripAdvisor.com
Broker Recommendations
Strong Buy 3
Buy 8
Hold 8
Sell 2
Strong Sell 0
Brokers Covering 21
DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes
Min/Max Investment = $100-$5,000/quarter
Reinvestment Fees -
Dividend investment fees: $0.00
Cash investment fees: $0.00
Auto reinvestment fees: N/A
Transfer Agent:
Montreal Trust
800-663-9097
Corporate Headquarters:
112-4th Avenue S.W.
Calgary, AB T2P 2
Phone: (403) 269-8151
Fax: (403) 269-6218
