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What Does Phillips 66’s Cash Flow Analysis Suggest?


Dec. 4 2020, Updated 10:53 a.m. ET

Phillips 66’s cash flow analysis

Phillips 66’s (PSX) cash balance fell 52% from 3Q15 to ~$2.3 billion in 3Q16. This was due to lower cash inflow from operations and partly offset by weaker cash outflow from financing and investing (capital expenditure and acquisitions).

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Cash flow from operations and investing

In 1Q16, Phillips 66’s cash flow from operations was lower due to weaker refining margins and earnings. But with the rise in refining earnings in 2Q16, cash flow from operations improved.

However, in 3Q16, cash flow from operations dropped again due to volatile refining earnings. Phillips 66 cash outflow on account of investing stood at $551 million in 3Q16.

Cash flow from financing—rising dividend yield

PSX’s cash flow from financing activities is mainly made up of changes in debt, dividend payments, and share buybacks. In 3Q16, Phillips 66’s (PSX) cash outflow on account of dividends rose to $329 million. With a steeper increase in dividend, as compared to its increase in stock price from 3Q15–3Q16, Phillips 66’s dividend yield rose. Currently, Phillips 66 trades at a dividend yield of 3%, which is higher than Phillips 66’s dividend yield of 2.7% in 2015.

Western Refining (WNR), Marathon Petroleum (MPC), and HollyFrontier (HFC) are currently trading at dividend yields of 4.1%, 3%, and 4.5%, respectively.

If you are looking for exposure to high dividend stocks, you might consider the Vanguard High Dividend Yield ETF (VYM). The ETF also has ~10% exposure to energy sector stocks.


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