Dividend Stocks: World’s Largest Refiner Valero Offers Solid Yield

Valero Energy (VLO) finds itself on IBD’s Dividend Leaders screen after posting strong earnings results while offering a solid yield.

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Valero Energy — headquartered in San Antonio, Texas — is the largest oil refiner in the world. It operates 15 refineries across the U.S., Canada and the United Kingdom.

Elevated demand for energy has seen company profits soar, with earnings per share skyrocketing to $29.16 last year from just $2.81 in 2021. Thus far in 2023, Valero has continued reporting solid results.

Second-quarter earnings were announced in July. Valero reported EPS of $5.40 — coming in above analyst estimates of $5.05. While refining revenue declined substantially from a year prior, the company reported strong growth in its renewable diesel segment. It saw $440 million in operating income compared to just $152 million a year prior.

Dividend Stock Second-Largest Producer Of Renewable Diesel

That growth has seen Valero become the second-largest producer of renewable diesel in the world.

Valero offers a solid dividend yield of 3.2%, more than double the 1.4% average dividend yield of the S&P 500.

While the dividend has remained unchanged over the past three years, it has shown a steep increase over a longer period: It climbed 600% over the past 10 years.

Valero is in a good position to continue to pay out a solid yield if energy prices remain somewhat buoyant. The company is in a particularly strong position due to the limited debt it carries. A total debt of $9 billion is relatively small compared to the company’s $44 billion market cap.

Shares of Valero Energy are trending higher and currently back above their 200-day moving average.

The stock is forming a cup base with a buy point at 150.39, per MarketSmith pattern recognition. A solid move above resistance around 140 would be bullish.

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