What Does a Cash Flow Analysis of Valero Energy Reveal?


Jan. 16 2017, Updated 7:35 a.m. ET

Valero’s cash flow analysis

In the previous article, we examined Valero Energy’s (VLO) leverage position. In this article, we’ll analyze the company’s cash flow. 

Valero saw a rise in its cash balance in the first nine months of 2016. VLO’s cash balance in the period stood at $5.9 billion, showing a 12% rise over the first nine months of 2015.

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Valero’s cash flow from operations and investing

VLO’s cash flow from operations fell in the first nine months of 2016 on the back of lower earnings in its Refining segment. Valero’s cash from operations fell 25% over the first nine months of 2015 to $3.8 billion in the same period in 2016.

Valero’s cash outflow from investing activities fell from $1.7 billion in the first nine months of 2015 to $1.4 billion in the first nine months of 2016. This was mainly due to lower capital expenditure and turnarounds.

Valero’s cash from financing

Valero’s cash from financing activities mainly consists of dividends and share buybacks. Valero has consistently witnessed rises in its dividend outflows. In the first nine months of 2016, Valero’s cash outflows on account of dividends stood at $840 million, rising from $608 million in the same period in 2015.

Valero is currently trading at a dividend yield of 3.6%. The dividend yield is a measure of dividend per share, compared to the price of the share. VLO’s dividend yield has risen in the past few quarters due to a steeper rise in dividends compared to its stock price rise.

Valero’s peers Tesoro (TSO), Marathon Petroleum (MPC), and Phillips 66 (PSX) are currently trading at dividend yields of 2.7%, 2.9%, and 3%, respectively. If you’re looking for exposure to high dividend stocks, you can consider the iShares Core High Dividend ETF (HDV). The ETF also has ~18% exposure to energy sector stocks.

Going forward, VLO’s cash flow will be dependent on the refining crack environment. Crude oil’s price direction largely affects the refining crack environment. For more on oil’s direction in 2017, read What’s the Outlook for Oil and Energy in 2017?


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