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Valero (VLO) Hikes Dividend, Boosts Share Buyback Capacity

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Valero Energy Corporation's (VLO - Free Report) board of directors recently announced plans to raise regular quarterly cash dividend to 80 cents per share from 70 cents per share, representing an increase of 14.3%. 

Following the hike, the company’s new annualized dividend will amount to $3.20 per share, up from $2.80 distributed earlier. This revised quarterly stock dividend is expected to be payable on Mar 6, 2018, to stockholders of record on Feb 13, 2018. Notably, the company’s dividend per share has been witnessing a rising trend for the last three years.

 

 

Along with the decision to increase dividend, Valero announced that it has sanctioned share repurchase of $2.5 billion. We would like to remind investors that the company, per its previous declaration, has an authorization to repurchase $1.2 billion of shares. The latest addition takes the total authorization to $3.7 billion.

The moves are expected to benefit Valero – scheduled to release its fourth-quarter and full year 2017 earnings on Feb 1, 2018 –  in the coming quarters. While the dividend hike is expected to help it retain shareholders’ confidence, the share repurchase will boost shareholder value.

Investors should also know that it generates higher dividend yields than its industry. While the industry has a dividend yield of 2.52%, Valero’s yield is 2.84%.

 

About Valero

San Antonio, TX-based Valero is among the largest independent refiner and marketers of petroleum products in the United States

Among all the independent refiners, Valero offers the most diversified refinery base. Shares of Valero have gained 51.5% in the last year compared with 36.5% rise of the industry it belongs to.

 

However, we are concerned about its escalating debt levels over the past six quarters. From no long-term debt as of December 2015, Valero’s debt load now stands at $8.4 billion.

Zacks Rank and Stocks to Consider

Valero has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Cabot Oil & Gas Corporation (COG - Free Report) , Royal Dutch Shell plc (RDS.A - Free Report) and Delek US Holdings, Inc. (DK - Free Report) .  While Cabot sports a Zacks Rank #1 (Strong Buy), Shell and Delek have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX -based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 37.2% year over year. Earnings for the year 2017 are expected to be up 357.1%.

Shell, based in The Hague, the Netherlands, is an integrated energy company. Its earnings for 2017 are expected to increase 102.2% year over year. The company delivered a positive earnings surprise of 18.1% in the third quarter of 2017.

Brentwood, TN-based Delek is an integrated energy company. Its sales for the fourth quarter of 2017 are expected to increase 95.7% year over year. The company delivered a positive earnings surprise of 19.1% in the third quarter of 2017.

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