Where does Valero (VLO) rank after its 20% announced dividend increase?

VLO

Valero’s (NYSE: VLO) dividend was increased by an impressive 20% with an overall yield above that of the S&P 500 Index at 3.54%. Valero is the largest independent petroleum refiner in the U.S. Owns a combined 15 refineries in the U.S., Canada, and the U.K. with an overall capacity of about 3.0 million barrels a day. Also has 11 ethanol plants in the Midwest with a combined capacity of 1.3 billion gallons a year.

Valero has paid dividends consecutively for 23 years. It currently ranks 15th in yield within the large cap basic materials dividend stocks. Valero has maintained an astounding three-year growth rate of dividends of over 42 percent. The quarterly dividend for the March payment will be $0.60 versus the prior year rate of $0.50 per share. VLO qualifies as a member of our Top 100 Dividend Stock List (see below).

top-100

The dividend will be paid at the new higher rate on March 3, 2016, to shareholders of record at close of business on February 9, 2016. Valero Energy Corp. is currently priced at $67.86. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
2/29/2016 0.6
11/19/2015 0.5
7/31/2015 0.4
5/11/2015 0.4
2/9/2015 0.4
11/17/2014 0.275
8/18/2014 0.275
5/19/2014 0.25
2/10/2014 0.25
11/25/2013 0.225
8/12/2013 0.225
5/20/2013 0.2
2/11/2013 0.183
11/19/2012 0.16
8/13/2012 0.16
5/21/2012 0.137
2/13/2012 0.137
11/14/2011 0.137
8/15/2011 0.046
5/16/2011 0.046
2/14/2011 0.046
11/15/2010 0.046
8/16/2010 0.046
5/17/2010 0.046
2/12/2010 0.046

Analysis of Valero Energy Corp. is based upon our five key criteria, which include; 

Category Value Score
Dividend Yield 3.54% 92
Dividend Growth (3-6 year avg) 45.6%  23
Forward P/E 10.88  35
S&P Financial Rating BBB  160
Beta 1.30  200
Total Score    510

Additional Information on P/S ratio and historical yield;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr max Yield % 5 yr lowest Yield %
3.54% 42.2% 49% 190.45 0.38 0.16 0.52 3.59% 0.66%

Final Analysis;   

Positives;

  • Valero’s dividend yield is above that of the S&P 500 Index
  • Valero maintains a 3 year dividend growth rate of 42.2%.
  • Valero has paid out a dividend consecutively for the past 23 years.
  • Valero maintains a credit rating of BBB. This is investment grade
  • Valero is trading at a low forward PE ratio.

Negatives;

  • Valero trades at a slightly elevated historical price/sales (P/S) ratio.
  • Valero maintains a beta of 1.30, higher than the average company.

Based upon its above average yield, low P/E, and continuity in steep dividend increases, Valero qualifies as one of our Top 100 Dividend Stocks

Valero Energy Corp. Dividend Yield Chart (Click to enlarge)

VLO2

Chart Explanation:  Dividend growth stocks may be viewed favorably when the current yield is above historical readings for the past 5 years. 

Further information on dividend investing and evaluating dividend growth candidates can be found at http://seekingalpha.com/author/timothy-mcintosh/articles

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