Western Refining Inc. WNR got an approval from its board of directors for the fourth-quarter 2015 dividend of 38 cents per share ($1.52 per share annualized), which represents an increase of 12% over the previous payout. The new dividend is payable on Nov 12, to shareholders of record as of Oct 27, 2015.
We believe that the dividend hike highlights not only the oil refiner’s commitment to create value for shareholders but also its healthy financial condition and confidence in business.
El Paso, TX-headquartered Western Refining, which plans to release third-quarter results on Nov 3, before the opening bell, is one the largest independent oil refiners in the U.S. with a combined crude oil processing capacity of approximately 151,000 Bbl/d. A major advantage is the company’s proprietary access to pipelines, which inhibits lower-cost competitors from supplying to Western Refining's key markets.
For more than a year, the operating environment of the company seems favorable with the plummeting crude prices. This is because refiners like Tesoro Corporation TSO, Valero Energy Corporation VLO, Marathon Petroleum Corporation MPC and Western Refining buy crude and sell the refined products like gasoline to the customers. The weak oil pricing scenario for more than the last 12 months reflects lower input cost for the company. Moreover, there is almost no chance of immediate crude price recovery in the near future, which is paving the way of further good times for the company.
Amid all the positives, one should notice that the requirement of policies to reformulate fuel and lower emission from refinery operations make the industry a highly regulated one. As a result, Western Refining is often forced to divert cash flows to ensure regulatory compliance, which can adversely impact profitability.
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