CVR Energy Raises Quarterly Dividend 50% (CVI)
By: Ned Piplovic,
After paying a flat quarterly dividend for 14 consecutive periods, CVR Energy, Inc. (NYSE:CVI) raised its quarterly dividend payout 50% for the upcoming dividend distribution in August.
In addition to the exceptionally high quarterly dividend boost, the company also rewarded its shareholders with an 8% dividend yield. The company combined its high dividend income payout with a significant share price growth to reward investor who bought the share price dip in 2016 and early 2017 with a total return on investment in excess of 80%.
While the company’s share price gained more than 60% over the past 12 months, it still might have some room to go higher before it reached the price levels before 2016 of $48 to $50. That potential capital gain and the high yielding dividend appreciation, might be good incentives to consider adding few CVI share to the portfolio. After confirming the outlook through their own research and analysis, interested investors should make their move before the August 3, 2018 ex-dividend date. Assuming stock ownership before the ex-dividend date will guaranty participation in the upcoming dividend distributions on the August 13, 2018, pay-date.
CVR Energy, Inc. (NYSE:CVI)
Based in Sugar Land, Texas and founded in 1906, CVR Energy, Inc., runs petroleum refining operations and manufactures nitrogen fertilizer through two business segments – Petroleum and Nitrogen Fertilizer segments. The Petroleum segment refines and markets transportation fuels, such as gasoline, diesel fuel, natural gas liquids, gas oil, asphalt, jet fuel and other products. This segment owns and operates a coking medium-sour crude oil refinery in Coffeyville, Kansas; a crude oil refinery in Wynnewood, Oklahoma and a crude oil gathering system serving Kansas, Nebraska, Oklahoma, Missouri, Colorado and Texas. Additionally, this segment also owns a proprietary pipeline system that transports crude oil from Caney, Kansas to its refineries. From that refinery, the company supplies products through tanker trucks directly to customers located in Coffeyville, Kansas and Wynnewood, Oklahoma, as well as to customers at throughput terminals on Magellan Midstream Partners, L.P. and NuStar Energy, LP’s refined products distribution systems. The Nitrogen Fertilizer segment operates a nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce nitrogen fertilizer products. This segment manufactures and markets a water solution of urea and ammonium nitrate (UAN) to agricultural customers, as well as ammonia products to agricultural and industrial customers.
The company started distributing a $0.75 regular quarterly dividend in the second quarter of 2013 and continued with same amount for seven consecutive quarters. In the first quarter of 2015, the company reduced its regular quarterly dividend from $0.75 to $0.50 and distributed the lover quarterly dividend amount until its most recent dividend distribution in mid-May 2018.
For the upcoming dividend distribution in August 2018, CVR Energy boosted its quarterly dividend 50% back up to its original $0.75 amount. This quarterly dividend amount corresponds to a $3.00 annualized payout and currently yields 8%. CVR Energy’s current yield outperformed the 2.2% simple average yield of the entire Basic Materials sector by more than 260% and is nearly double the 4.17% average yield of all the company’s peers in the Oil & Gas Refining & Marketing industry segment. Even disregarding the segment’s companies that do not distribute any dividends raises the segment’s average yield for only dividend-paying companies to 5.5% and CVR Energy’s current 8% yield still outperforms by more than 45%.
At the onset of the trailing 12 months, the share price pulled back 25% before reaching its 52-week low inflection point of $17.06 on August 1, 2017. After the 52-week low, the share price rose more than 130% before breaking above $39 by the beginning of January 2018. After a brief correction along with the overall markets in February, the share price resumed its uptrend and reached its 52-week high of $46.15 by May 21, 2018 for a total gain of more than 170% above the 52-week low from August 2017. After peaking in May, the share price pulled black and closed on July 6, 2018 at $36.28. This closing price was still more than 18% short of the May peak price but nearly 65% higher than it was one year earlier and almost 120% above the 52-week low price from August 2017.
The share price decline in 2016 and the first half of 2017 depressed the total returns over the last three years to just 12.4%. While slightly higher at 13.5%, the total return over the last five years is even lower on an annualized basis because of the longer term. However, over the last 12month the high dividend income and the high share price rise combined for a shareholder total return of nearly 85%.
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