SUN: Can This Double-Digit Yielder Keep Delivering?

Some good news is that despite the lower-than-expected cash flow, Sunoco can still afford its distribution.

Last year, the payout ratio based on CAD was 68%. This year, that number is expected to rise to 79%, which is still fine. As long as a partnership is not paying more than 100% of its cash flow to investors, it’s not a problem.

I don’t expect a cut to Sunoco’s distribution in the immediate future. But that declining CAD is something to keep an eye on.

If it does come in significantly lower than last year’s and if later in the year it’s determined that cash flow will fall again in 2022, the company may have to consider reducing the distribution.

For now, the risk of a distribution cut is moderate.

Dividend Safety Rating: C

Dividend Grade Guide

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