HFC’s Dividend Yield: Small Market Cap but Large Yield
HFC’s dividend yield
In the previous part, we discussed PBF Energy (PBF), the refining stock with the highest dividend yield in our survey. In this article, we’ll review HollyFrontier’s (HFC) dividend yield.
HollyFrontier is the second-highest dividend-yielding stock in our survey of seven stocks. HFC is an American refining company with Refining, Midstream, and PCLI (Petro-Canada Lubricants) segments. The company also has the fifth-largest market cap—about $6 billion—among the seven stocks.
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HollyFrontier has a current dividend yield of 3.8%. In 3Q17, HFC made a dividend payment of $0.33 per share. The dividend was announced on August 2, 2017, and it was paid on September 20. HFC has paid dividends consistently in the past three years.
HollyFrontier’s dividend payments have risen during this period, as it made a dividend payment of $0.32 per share on September 25, 2014. The dividend payments of Valero Energy (VLO) and Phillips 66 (PSX) have risen in the past three years.
HollyFrontier currently trades at a forward price-to-earnings (or PE) ratio of 17.6x, which is a significant increase from its 2Q14 forward PE ratio of 10.3x. Also, HFC’s current forward PE trades above the average forward PE of 16.0x of the six refiners (excluding DK, as we discussed in Part 1). This could be due to HFC’s growth activities.
HFC recently acquired Petro-Canada, expanding its footprint in the specialty chemicals sector. The acquisition is expected to generate $100 million–$200 million of annual EBITDA1 for HFC. Plus, more than $20 million of synergies are expected to be produced by 2018.
HFC’s master limited partnership, Holly Energy Partners (HEP), is also expanding via dropdowns and acquisitions. HFC has capex plans to increase feedstock flexibility, yield higher value products, sustain growth, and improve logistics capabilities. HFC plans to integrate the downstream supply chain to create optimum value.
In the next part, we’ll cover Valero Energy (VLO), the stock with the third-best dividend yield.
- earnings before interest, tax, depreciation, and amortization ↩