Oil refiner and marketer Western Refining Inc. has recently increased its quarterly cash dividend payment by 50% to 12 cents per share, up from 8 cents per share paid in the fourth quarter of 2012. The new dividend will be paid on Feb 14, 2013, to shareholders of record as on Jan 30, 2013.
Importantly, the latest payout marks the second dividend hike by the downstream operator since the first quarter of 2012. If the current dividend is maintained for the rest of the year, the annualized dividend payout of the company would be 48 cents per share.
Based on the closing price of $30.95 as on Jan 16, 2013, the proposed dividend affirms a yield of 1.6%. A steady dividend payout facilitates the long-term strategy of the company to provide attractive risk-adjusted returns to its stockholders.
The dividend hike reflects continued strong performance by the company, backed by solid operating results, good investments and a diligent execution of its strategic plan. We believe that the company will be able to generate sufficient cash flows for its shareholders in the coming years, which will likely be backed by strong operating performances and good management decisions.
Incorporated in 2005, El Paso, Texas-headquartered Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S. It is also one of the largest independent oil refiners in the U.S. The company operates in three segments, namely, Refining, Wholesale, and Retail.
Western Refining currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
The company’s easy access to the lower-priced West Texas Intermediate (WTI) crude gives a cost advantage, which is reflected in the company’s high gross margins vis-à-vis its peers like Valero Energy Corp. (VLO - Free Report) and Tesoro Corp. .
On the flip side, the inherent volatility of the refining business reduces the accuracy and reliability of long-term earnings and revenue estimates of the company. Additionally, results are exposed to unplanned shut-downs that may have a lingering impact.