Buffett and the Berkshire team exited their positions Zoncor (TSX:SU) in 2021, after years of adding (and subtracting) from this position. He owned the Canadian energy giant from 2013 to 2021 and executed a series of trades around this stock as the oil price fluctuated by significant margins.
This is why I think Suncor still seems like a solid bet, and Buffett wasn’t wrong to open his position (but the timing of this sale may make him unhappy).
The total return is important
Most Buffett followers will consider the Oracle of Omaha’s penchant for dividend stocks as key pillars of his portfolio. Even many of the non-traditional choices he and his team made in the technology sector and other areas that he previously identified as outside his circle of competence paid off at the time.
The rationale seems relatively simple in this regard. Buffett and Berkshire are looking for mature companies with world-class brands in industries that are highly profitable. If its assets return capital to shareholders as quickly as possible, that’s even better.
Suncor’s 4% dividend yield (and dividend growth profile even during times of energy sector turbulence) underlines the company’s robust business model and future earnings expectations. As long as there is a perceived floor under how low the company’s dividend yield can go, this is a stock with a lot of capital growth, even in the long term.
A nice move since 2021
Buffett has long argued that not swinging on the juiciest pitches is his biggest regret. He owned Suncor for about 8 years, so he definitely made a move here.
That said, the fact that he sold during the doldrums of the energy market is surprising, as that’s when he’s known to ramp up his purchases of such undervalued companies. I think he would say he would like to be in this position, even if it was a relatively small position to begin with. But long-term investors looking for companies with his blessing certainly have an interesting topic to consider in Suncor.
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