Valero Maintains 7.5% Dividend Yield, Assuaging Investor Concerns

According to RBC Capital analyst Brad Heffern, the news is a ‘slight positive’ for the oil refiner and marketer. “While we see the VLO dividend as safe for at least several quarters of COVID demand impacts, we have received inbound investor queries of late regarding potential cuts or a suspension” he wrote on April 24.

“VLO also has a very strong program to return capital to shareholders, with $13+ billion returned in 2015–19” the analyst continued. “VLO is able to export significant products into the global marketplace, which provides a buffer against weak US demand” said Heffern. He has a buy rating on the stock and $54 price target.

Valero is due to reveal its first quarter earning results on April 29. Earlier this month, the company provided a key business update where it provided preliminary estimated financial information for 1Q20.

This included preliminary revenue of $20.1B-$22.2B, vs the analyst consensus estimate $17.7B, Q1 adjusted EBITDA of $380M-$820M, and 1Q20 net income of ($200)-$160 million.

Overall Valero shows a bullish Strong Buy Street consensus, despite posting a year-to-date loss of 44%. That’s with a $72 average analyst price target (37% upside potential). (See Valero Energy’s stock analysis on TipRanks).

Citigroup analyst Prashant Rao recently reiterated his VLO buy rating, but slashed his price target from $114 to $60 price target. The analyst believes “risk/reward upside on 2021 earnings is attractive but less compelling than at Phillips 66 (PSX).”

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