Superior Plus Corp: A Beacon of Dividend Resilience in the Energy Transition Era

The energy sector is undergoing a seismic shift, with low-carbon fuels and infrastructure becoming cornerstones of global decarbonization efforts. Amid this transition, Superior Plus Corp (TSX: SPB) emerges as a paradoxical gem: a dividend-paying, propane-centric company that’s also a leader in compressed natural gas (CNG) distribution. Its Q1 2025 results—record EBITDA of $260.5M, a 54% surge in free cash flow, and a 2.8% yield—signal a rare opportunity to profit from both income and ESG-driven growth. This is no ordinary energy play; it’s a strategic bet on resilience in a high-risk, low-carbon world.

The Dividend Paradox: Cutting to Grow Stronger

Superior Plus’ dividend was slashed from C$0.18 to C$0.045 per share in Q1—a move that initially spooked investors. But dig deeper, and the strategy becomes clear: capital preservation and re-allocation. With free cash flow per share soaring to $0.94 (up 54% year-over-year), the company prioritized $40M in share buybacks, reducing its public float by 2.6%. This isn’t weakness; it’s a calculated shift toward shareholder-friendly capital allocation.

The yield of 2.8% at current prices reflects a stock undervalued by the market’s focus on short-term volatility. With leverage ratios improving to 3.7x (down from 4.1x at year-end . 2024) and a path to 3.6x by year-end, Superior Plus has room to reignite dividends as its ESG-linked growth initiatives scale.

Low-Carbon Fuel Leader: CNG’s Untapped Potential

While propane remains the backbone of its business ($212.7M in EBITDA from propane in Q1), Superior Plus’ CNG segment is its growth engine. Q1 CNG EBITDA hit $55.1M, up 7%, fueled by a 16% expansion in mobile storage units (MSUs) and a 10% rise in delivered volumes. This segment isn’t just a side project—it’s a $70M EBITDA opportunity by 2027 via the Superior Delivers program, which optimizes contracts and routes to boost margins.

CNG is a low-carbon alternative to diesel, critical for industries like mining and transportation. As governments incentivize decarbonization, Superior Plus is positioning itself as a critical infrastructure partner, with long-term contracts and scale advantages. This isn’t just a cyclical play—it’s a structural tailwind.

Why Now? The Perfect Storm of Valuation and Catalysts

• Undervalued Stock: At $6.42 per share (post-buybacks), the stock trades at a discount to its 5-year average P/FCF multiple, despite record cash flows.
• Dividend Safety: The cut ensures a lower payout ratio, reducing risk. With free cash flow covering dividends 18x over, there’s a buffer for future hikes.
• ESG-Backed Growth: The CNG expansion and Superior Delivers program (targeting $20M EBITDA growth in 2025) align with ESG mandates, attracting ESG-focused capital.

Risks? Yes. But Manageable with Cash Flow Fortitude

• Weather and Commodity Prices: Propane demand is tied to cold weather and oil prices. But the CNG segment’s stability (industrial contracts) and diversified revenue streams mitigate this.
• Currency Risks: A weaker Canadian dollar pressured margins, but the U.S. propane business (65% of propane EBITDA) acts as a hedge.
• Debt Reduction: The leverage ratio is improving, and the $140M annual buyback cap ensures discipline.

Conclusion: A Dividend Aristocrat in Disguise

Superior Plus Corp is underappreciated. Its Q1 results prove that it can grow EBITDA 11% annually while deploying capital to protect shareholders through buybacks and sustainable dividends. With a 2.8% yield, $0.94 per share in free cash flow, and a $70M EBITDA roadmap, this is a rare blend of income and growth in an energy landscape dominated by volatility.

The TSX:SPB stock is a buy now—ideally before the market catches on to its ESG-driven resilience.

Investment thesis: Buy SPB for yield, stay for its low-carbon growth. The risks are real, but the payout and valuation make it worth the ride.