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Is CVR Refining’s 14% Yield Really Attractive?

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CVRR’s yield

Based on its latest quarterly distribution annualized, CVR Refining (CVRR) is trading at a yield of ~14%. It paid a per share distribution of $0.45 in 4Q17. CVR Refining is a variable distribution MLP. Its distributions vary each quarter depending on the amount of available cash for distribution it generates for the given quarter. It paid a per-share distribution of $0.94 in 3Q17. It didn’t pay distributions for seven quarters prior to 3Q17.

The variability in distributions makes CVR Refining less attractive to some income investors who are looking for a stable income stream each quarter.

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Improved refining margins contributed to a rise in CVR Refining’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 4Q17 to $76.4 million, from $27.7 million in 4Q16. Available cash for distribution rose to $65.6 million in 4Q17 compared to no available cash for distribution in 4Q16.

CVR Refining stock has fallen ~20% year-to-date.

Analyst recommendations for CVRR

None of the analysts surveyed by Reuters have rated CVR Refining a “buy,” but 87.5% of them have rated it a “hold,” and 12.5% have rated it a “sell.” The mean price target for CVRR is $14.50. The stock is currently trading at $13.30. If CVRR attains its price target in a year, it would imply a return of 9%.

In comparison, 20% of the analysts surveyed rate Calumet Specialty Products Partners (CLMT) a “buy.”

In the next and final part of this series, let’s take a look at NGL Energy Partners (NGL), which is trading at a yield higher than 12%.

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