Suncor Energy Inc. declined after Canada’s largest energy company by market value reported fourth-quarter profit and a dividend increase that trailed analysts’ estimates.
Suncor fell 1.7 percent to C$35.04 ($31.63) at the close in Toronto. The stock, which is down 5.9 percent this year, has 20 buy and four hold recommendations from analysts.
Chief Executive Officer Steve Williams has sold assets and reduced operating costs to boost cash flow and profit. The Calgary-based company announced a share buyback yesterday of as much as C$1 billion and raised its dividend 15 percent, after a 54 percent boost last year.
“We believe the market would prefer to see a higher dividend rather than a share buyback,” Phil Skolnick, a New York-based analyst for Canaccord Genuity Group Inc., wrote in a note to investors today. The dividend will rise to 23 cents in the first quarter, up from a 13-cent payment in 2013.
Williams defended the dividend, while acknowledging that some in the market were talking about a 25 percent or even 40 percent dividend boost.
“We want that dividend to be competitive,” Williams said in a webcast with analysts today. “Our commitment is to be competitive, reliable, sustainable and grow that thing through time and that’s where the 15 percent comes from.”
Net income was C$443 million, or 30 cents a share, for the fourth quarter compared with a loss of C$574 million, or 38 cents, a year earlier, the company said in a statement yesterday. Excluding one-time costs, per-share profit was 11 cents less than the 77-cent average of 13 analysts’ estimates compiled by Bloomberg.
Sales also fell short of estimates, totaling C$10.2 billion. The loss in the fourth quarter of 2012 included a C$1.49 billion one-time charge related to its canceled Voyageur oil project in Alberta.
Average production from Suncor’s oil-sands operations increased to a record 409,600 barrels a day in the quarter from 342,800 barrels in the year-earlier period. For 2014, the company expects average production from all operations to be 525,000 to 570,000 barrels of oil equivalent, down from an earlier estimate of 565,000 to 610,000 barrels.
Suncor and partners Total SA and Teck Resources Ltd. agreed in the fourth quarter to move ahead with the C$13.5 billion Fort Hills oil-sands venture which will produce 180,000 barrels a day in 2018.
The company also operates refineries in Alberta, Ontario, Quebec and Colorado which produce a combination of fuels, solvents and petrochemicals, according to its website.