Suncor Energy (TSX:SU) is one of Canada’s largest integrated energy companies, with operations spanning oil sand production, refining, and retail distribution. As such, and with many investors focusing intently on the energy sector (for various geopolitical reasons), this is a sector that could continue to see heightened volatility moving forward. In such environments, long-term investors have generally won by picking up shares of various dividend stocks, such as Suncor, at steep discounts.
The thing is, despite a dividend yield of 4.1% and a recent rally to fresh highs, I think this is a stock that’s relatively undervalued. Let’s dive into why that’s the case.
Strong a diversified business model
As mentioned, Suncor is a massive integrated energy player. The company’s ability to maximize the value it receives across the production chain is impressive, and I think this company remains one of the best ways to play the energy and commodity complex right now.
A significant oil sands player, the company has also expanded its refining and retail operations, providing relatively diversified exposure to this sector.
And with Suncor’s management team increasingly focused on efficiency and cost-cutting initiatives, there’s a lot to like about the company’s earnings per share growth prospects moving forward.
Growth could materialize in 2025
Aside from earnings growth, Suncor could also see some significant top-line growth if oil prices rise due to tariff-related concerns and/or continued robust global demand moving forward.
Of course, recessionary headwinds could derail this thesis, and any sort of slowing of consumer demand wouldn’t be good for Suncor right now. Additionally, if Trump’s proposed tariffs do hit the Canadian energy sector, this is a stock that could see some downside.
But in terms of the balance of risks at play, it does appear market participants continue to view Suncor favourably. I think that’s a trend that’s likely to continue in 2025, making this one of my top picks in the market right now.