Exploring the Sustainability and Growth of Sunoco LP's Dividends
Sunoco LP (SUN, Financial) recently announced a dividend of $0.88 per share, payable on 2024-05-20, with the ex-dividend date set for 2024-05-10. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Sunoco LP's dividend performance and assess its sustainability.
What Does Sunoco LP Do?
Sunoco LP is a Delaware limited partnership formed in June 2012 by Susser Holdings Corporation. In September 2012, the Company completed its initial public offering. The Company, along with its wholly owned subsidiary, is an independent motor fuel distributor by gallons in Texas, and among the distributors of Valero and Chevron branded motor fuel in the United States. The Company also receives rental income from real estate that it leases or subleases. SUSS operated approximately 580 retail convenience stores under its proprietary Stripes convenience store brand at year-end, mainly in growing Texas markets. Stripes is an independent chain of convenience stores in Texas based on store count and retail motor fuel volumes sold. Its business is integral to the success of SUSS' retail operations, and SUSS purchases substantially all of its motor fuel from the Company. In addition to distributing motor fuel, it also distributes other petroleum products such as propane and lube oil, and receives rental income from real estate that it leases or subleases. The Company purchases motor fuel mainly from independent refiners and oil companies and distributes it throughout Texas and in Louisiana, New Mexico and Oklahoma. The Company competes mainly with other independent motor fuel distributors. The Company is subject to various federal, state and local environmental laws and regulations, including those relating to underground storage tanks; the release or discharge of hazardous materials into the air, water and soil; the generation, storage, handling, use, transportation and disposal of regulated materials; the exposure of persons to regulated materials; and the remediation of contaminated soil and groundwater.
A Glimpse at Sunoco LP's Dividend History
Sunoco LP has maintained a consistent dividend payment record since 2012. Dividends are currently distributed on a quarterly basis. Sunoco LP has increased its dividend each year since 2012. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 12 years.
Breaking Down Sunoco LP's Dividend Yield and Growth
As of today, Sunoco LP currently has a 12-month trailing dividend yield of 6.03% and a 12-month forward dividend yield of 6.29%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Sunoco LP's annual dividend growth rate was 0.50%. Extended to a five-year horizon, this rate decreased to 0.20% per year. And over the past decade, Sunoco LP's annual dividends per share growth rate stands at 5.30%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2024-03-31, Sunoco LP's dividend payout ratio is 0.76. And this may suggest that the company's dividend may not be sustainable. Sunoco LP's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Sunoco LP's profitability 7 out of 10 as of 2024-03-31, suggesting good profitability prospects. The company has reported net profit in 7 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Sunoco LP's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Sunoco LP's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Sunoco LP's revenue has increased by approximately 28.40% per year on average, a rate that outperforms than approximately 70.53% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Sunoco LP's earnings increased by approximately 26.40% per year on average, a rate that outperforms than approximately 56.6% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 33.60%, which outperforms than approximately 83.54% of global competitors.
Conclusion
Considering Sunoco LP's consistent dividend payments, growth in dividends over time, and robust profitability and growth metrics, the company presents a compelling case for investors seeking stable dividend income. However, the sustainability of these dividends, as indicated by the payout ratio, requires careful monitoring. For investors seeking to diversify their portfolio with high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener for more insights.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
