HollyFrontier Corporation Offers 150% One-Year Total Return (HFC)
By: NED PIPLOVIC
HollyFrontier Corporation (NYSE:HFC) has been rewarding its shareholders with steady regular dividends over the past five years and has complemented the dividend distributions with exceptional share price growth since May 2017 for a combined total return on shareholders’ investment of more than 150% over the past 12 months.
The extraordinary asset appreciation over the past year provided significant gains for current shareholders. However, the same share price growth affected negatively the company’s dividend yield, which dropped more than 60% over the past year to the current 2% dividend yield. While the company’s recent share price spiked reduced the attractiveness of this stock as a dividend income play, the company currently has a very low dividend payout ratio. A low payout ratio could potentially allow the company to resume raising its dividend payouts. Alternatively, the company could issue special dividends as it did few years ago.
Some investors might indeed speculate that HollyFrontier’s share price will continue rising and that the company might increase its dividend income distributions through advancing its regular dividend or paying special dividends. Those investors should consider adding HFC shares to their portfolio before the company’s next ex-dividend date on May 22, 2018, to ensure eligibility for the next round of dividend distributions on the June 14, 2018, pay date.
HollyFrontier Corporation (NYSE:HFC)
Headquartered in Dallas, Texas, and founded in 1947, the HollyFrontier Corporation operates as an independent petroleum refiner in the United States. The company operates through the Refining segment, the Lubricants and Specialty Products segment and Holly Energy Partners LP (NYSE:HEP). The HollyFrontier Corporation primarily produces specialty lubricant and modified asphalt products, as well as high-value light products, such as gasoline, diesel and jet fuel. As of December 2017, the company owned and operated five refining facilities in the U.S. with a combined crude oil processing capacity of nearly 500,000 barrels per day. Additionally, the company owns and operates the Petro-Canada Lubricants production facility in Mississauga, Ontario, which has a lubricant production capacity of more than 15,000 barrels per day.
The company’s total annual dividend distribution has been fluctuating over the past two decades but kept an overall rising trend over the long term. Since 1998, the total annual dividend rose 44-fold by advancing at an average growth rate of nearly 21% per year. Even over the past 10 years, the company enhanced its total annual dividend payout 355%, which is equivalent to a 16.4% average annual growth rate.
For the 12th consecutive quarter, the company is paying a $0.33 quarterly dividend, which converts to a $1.32 annualized payout for 2018 and yields 2%. HollyFrontier’s current yield declined from 4.8% one year ago to the current level because the share price rose more than 140% since May 2017. Despite the significant decline over the last year, the company’s current yield is still just slightly below the 2.3% average yield of the entire Basic Materials sector.
HFC currently distributes a small portion of its earnings as dividends. The company’s current dividend payout ratio is only 21%, which leaves plenty of room for future dividend hikes or distribution of special dividends like the company did between 2011 and 2014. During that period, the company distributed 15 special dividend payments, with total annual amounts that averaged almost 220% of the regular annual dividend payouts.
After a significant decline in early 2016, the company’s share price traded sideways over the remainder of that year and the first half of 2017. However, the share price took off upwards from its five-year low of $23.90 at the end of May 2017. Since bottoming out at the end of May 2017, the share price ascended, with just one drop of approximately 18% during January and February 2018. The share price resumed its rapid ascend in March 2018 and closed on May 10, 2018, at $67.45, which was 144% higher than it was one year earlier and nearly 185% above the 52-week low from May 30, 2017.
Unlike most companies that offer higher cumulative returns over longer periods, HFC’s current share price growth has reversed the situation. While the company’s five-year total return was just below 60% and the three-year total return came in at 71%, the shareholders enjoyed a total return in excess of 150% over the past five years
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.