For most independent oil and gas producers, dividend growth is not a top priority. They typically focus on bringing value to their shareholders through growing their production. Suncor Energy (SU 0.94%), whose fourth quarter production numbers were stalled in comparison with 2012 and down more than 6% consecutively, decided to take another path.

The company recently increased its quarterly dividend by 15% from $0.20 per share to $0.23 per share, taking the annual yield closer to 3%. Does this now make the company an income play?

Production is likely to decline in 2014
Suncor's production averaged 562,400 barrels of oil equivalent per day (boe/d) in 2013. The company expects to produce between 525,000 boe/d and 570,000 boe/d in 2014. It means that if Suncor doesn't hit the upper range of its guidance, its 2014 production will be lower than in 2013.

Back in November, Suncor was more optimistic and projected 2014 production of 565,000 boe/d to 610,000 boe/d. What happened since then? The company realized that its Syrian assets are worth nothing, as the civil war in the country has no end in sight.

What's more, production from Libya averaged 1,000 barrels per day in the fourth quarter compared to 44,400 barrels per day in the previous year as political unrest resulted in the closure of export terminal operations at eastern Libyan seaports. Suncor no longer counts on the fast resolution of Libyan problems.

The situation in Libya also hurts companies like Marathon Oil (MRO -2.02%) and Occidental Petroleum (OXY -2.33%). In its recent earnings report, Marathon stated that it had no liftings in Libya during the fourth quarter as a result of ongoing labor strikes at the Es Sider oil terminal.

Port strikes in Libya also influenced Occidental's production numbers, which were down more than 2% consecutively. In Occidental's case, severe weather conditions and plant turnaround in its Permian operations also contributed to the production decline.

Plenty of cash on the balance sheet could lead to more dividend increases
Suncor finished the fourth quarter with $5.2 billion of cash on its balance sheet. The company plans to increase its 2014 capital expenditures by 22%. This increase is likely to be funded with cash from operations if oil prices stay at current levels.

What's more, the company stated that it had no plans for large non-core acquisitions and no plans for significant exploration outside of existing operations in the next couple of years. This means that existing cash is likely to remain intact. As this cash must be ultimately put to work, it could mean more dividend increases and share buybacks.

Suncor has already decided to increase its share repurchase program by up to $1 billion and increase its quarterly dividend to $0.23 per share. The most notable increase happened in April of 2013, when the quarterly dividend was lifted from $0.13 per share to $0.20 per share. Given the current situation, I believe that the dividend growth trend will continue.

Bottom line
With a yield of just below 3%, Suncor could be on income investors' radar. The company has stable operational cash flow and a significant amount of cash on the balance sheet, which is likely to lead to more dividend increases.

The weakness of Canadian dollar is positive for the cost side of the story, as most of Suncor's costs are denominated in Canadian dollars. At the same time, Suncor's growth is likely to be subdued, and this could hurt its prospects for share price appreciation.