The volatility of energy stocks can understandably scare investors. While this is understandable, there is a lot more going on with these stocks than volatility. More than ever, energy companies are creating value and purifying their operations as they move into the future. This is what made it possible Suncor Energy Inc. (TSX:SU) to offer investors a generous 4.1% dividend yield today.
Should we buy Suncor Energy stock for this dividend?
Suncor’s turnaround
A few years ago, Suncor was in the news. But not in a good way. The company suffered from safety problems, accidents, operational inefficiencies and overall suboptimal performance.
A new CEO and an internal shake-up followed. After hitting a low of around $15 in 2020, Suncor stock is currently trading at over $55. This represents an increase of almost 270%. In addition, Suncor’s dividend has increased. In fact, Suncor’s dividend has grown 170% over the past five years, which equates to a compound annual growth rate (CAGR) of 22%.
Ensure stable cash flows
Suncor’s operations consist of a downstream segment (refining) and an upstream segment (exploration and production). This diversification gives Suncor the benefit of more predictable and stable cash flows, with each segment driven by slightly different variables.
In the five years ending in 2024, Suncor’s operating cash flow rose 500% to $15.9 billion. This robust performance continues in the first half of 2025, with operating cash flow of $5 billion.
This is a key feature of the company: more stable and resilient cash flows. And Suncor’s management is committed to returning these cash flows to shareholders. In Suncor’s most recent quarter, nearly $1.5 billion was returned to shareholders through dividends and share buybacks. It is precisely this type of activity that is highly conducive to stable, reliable dividends.
Exceeding expectations
Suncor emerged from the tough times by developing a new focus and culture. The results of this? Record production, record refinery utilization and lower operating costs, to name a few.
Naturally, this also goes hand in hand with strong results that have exceeded expectations for many quarters. In 2024, Suncor posted earnings per share (EPS) of $5.40, up 6% from the previous year.
Finally, Suncor has generated strong returns due to the company’s focus on value creation, debt reduction and operational efficiency. For example, Suncor’s return on equity (ROE) currently stands at 12.7%. ROE is a measure of how efficiently a company uses shareholder money to generate profits. So this means that for every $1 of common stock, Suncor generates $12.70 in net income.
The bottom line
Although Suncor is an energy company that can be subject to volatility due to the nature of a commodities business, the company has taken steps to improve the quality and quantity of its earnings and cash flows. This results in greater value creation, greater efficiency and greater returns for shareholders. Therefore, I would definitely buy Suncor Energy stock for its high-quality dividend.
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