Suncor Vitality (TSX:SU) is among the many hottest dividend shares in Canada. At present, Suncor pays shareholders an annual dividend of $2.18 per share, indicating a ahead yield of 4.1%.

Valued at $68 billion by market cap, Suncor Vitality is likely one of the largest power corporations within the nation. It operates via segments resembling oil sands, exploration and manufacturing, and refining and advertising.

Within the final 20 years, Suncor Vitality has returned 206% to shareholders. Nevertheless, after adjusting for dividends, whole returns are nearer to 393%. Comparatively, the TSX index has returned 362% to shareholders in dividend-adjusted beneficial properties since April 2004.

As historic returns don’t matter a lot for buyers, let’s see if Suncor Vitality inventory is a purchase, promote, or maintain at this time.

How did Suncor Vitality carry out in 2023?

Suncor Vitality’s robust upstream asset efficiency within the second half of 2023 drove file upgraded utilization of 92% — 3% increased than the earlier file. Its robust efficiency showcased Suncor’s energy of its regional oil sands integration, which gives operational flexibility via interconnected pipelines.

Furthermore, the downstream operations enterprise additionally carried out effectively, with an annual refining utilization of 90%. Additional, Suncor introduced a brand new partnership with Canadian Tire in its retail enterprise. The partnership has allowed Suncor to safe a provide settlement for its refineries, leading to a 15% enhance in retail gas gross sales whereas increasing the presence of Petro-Canada branded stations throughout the nation.

Suncor reported adjusted funds from operations of $13.3 billion and deployed $5.57 billion towards capital expenditures. So, its free money circulate stood at $7.73 billion. Suncor paid $2.74 billion in whole dividends to shareholders in 2023, indicating a payout ratio of lower than 40%.

A low payout ratio gives Suncor with the flexibleness to extend dividends additional, reinvest in progress tasks, goal acquisitions, and decrease debt. Within the final 10 years, Suncor Vitality inventory has greater than doubled its dividend payouts, which is phenomenal for an power inventory.

A deal with value optimization and liquidity

Much like a number of different corporations throughout sectors, Suncor Vitality is concentrated on reducing its value base to offset macro headwinds resembling rate of interest hikes and inflation. In 2023, it lowered “above-field” prices by $450 million through workforce reductions.

In 2024, Suncor goals to decrease working prices with the addition of 55 ultra-class 400-tonne vans to its mining fleet. The vans are anticipated to switch much less environment friendly, higher-cost automobiles, producing vital value financial savings in 2024 and past.

Within the final 12 months, Suncor accomplished the sale of non-core property, together with its U.Okay. North Sea upstream property and its renewable energy enterprise, for $1.8 billion, which was increased than value estimates.

The sale enabled Suncor to accumulate remaining working pursuits in Fort Hills for $2.2 billion, including 89,000 barrels per day of bitumen manufacturing capability. Suncor emphasised full possession of Fort Hills permits for regional synergies and improved decision-making.

The Silly takeaway

Suncor inventory surged over 20% in 2024 as a consequence of increased commodity costs. Sometimes, the efficiency of power shares, together with Suncor, is tied to grease costs, making them risky.

Priced at 10.5 instances ahead earnings, Suncor inventory is kind of low-cost, particularly if oil costs stay elevated. Investing in Suncor Vitality inventory is right for income-seeking buyers who count on oil costs to achieve momentum in 2024.