❌ Goldman Sachs has recently downgraded Imperial Oil (IMO) from Neutral to Sell, signaling concerns about the stock’s future growth potential despite a strong run. The decision comes after a nearly 20% year-to-date rally that brought the stock close to its 52-week high. While the company continues to deliver steady operational performance at assets like Kearl and Cold Lake, the underlying concern is how its future returns stack up against the competition.
📉 The crux of the downgrade lies in free cash flow projections. Imperial’s 2025 and 2026 free cash flow yields are forecasted at 8% and 9%, respectively—noticeably lower than the peer group average of 10% to 11%. This gap in returns is a key reason Goldman believes Imperial may underperform going forward. In a sector where capital return metrics are crucial, this relative shortfall stands out.
💰 On the dividend front, Imperial Oil has a solid track record. It has consistently paid dividends for 35 years, a testament to its commitment to shareholder returns. The current dividend yield sits at 2.71%, with the latest payout of $0.72 per share declared in January and set for payment in early April. While steady, the yield also trails peers offering more aggressive capital return programs.
📊 For long-term income-focused investors, Imperial’s stability might still hold appeal. However, for those seeking a mix of yield and growth, the downgrade suggests looking elsewhere in the sector may offer better total return potential.