The carnage in the energy sector has been deep and wide with United States Oil (NYSE: USO), a major exchange traded fund for oil, and United States Natural Gas, (NYSE: UNG), a major exchange traded fund for natural gas, off significantly.
While that has been the story for many individual oil and natural gas stocks, Suncor Energy (NYSE: SU), a major Canadian energy company, is up for the last week and month of market action (chart below).
There is much to like about Suncor Energy, no matter what happens with United Natural Gas, United States Oil, and the rest of the sector. Suncor Energy is much more profitable than many other oil and natural gas firms. The gross margin for Suncor Energy is 58.70 percent. By contrast, the gross margin for ExxonMobil (NYSE: XOM), the biggest oil and natural gas entity in the world, is 24.80 percent.
It is worth pointing out that both ExxonMobil and Suncor Energy are significant holdings of legendary investor Warren Buffett.
Suncor Energy has the cash flow and compound growth that “The Oracle of Omaha” seeks for his investments. It has little debt. Buffett looks for that in an investment. That is due to Buffett’s belief that a well-run business should be able to generate enough cash for all of its needs. It also allows for more capital to be shared with those owning the stock in the form of a dividend payment.
This takes place with Suncor Energy, and more as the dividend yield shows.
The dividend yield for Suncor Energy is just over 3 percent. ExxonMobil has a dividend yield of 2.97 percent. The average dividend yield for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is under 2 percent.
For long term investors, the dividend yield of Suncor Energy pays for the wait for the oil and natural gas sector to recover!