VLO - Valero: Growing Free Cash Flow To Support Dividend Growth
2024-06-12 04:18:08 ET
Summary
- Valero is a well-run company with increasing free cash flows and a strong liquidity profile.
- VLO may remain a bit vulnerable to shifts in the pricing of crude oil, as well as the levels of production. However, they are efficiently managing these shifts.
- Dividend income growth can be significant over time with consistent reinvestment and capital additions.
- Valuation shows upside potential, with a price to earnings ratio below the sector median and Wall St. price targets indicating a 17% upside.
- Based on my dividend discount calculation, I estimate a fair value around $171 per share.
Overview
I previously covered Valero ( VLO ) back in August of last year. Since then, it has stayed on par with the S&P 500 ( SPY ) and provided a total return slightly over 21%. Now that a few quarters has gone by, I wanted to revisit and provide some updated insights around the valuation, benefits as a dividend compounder, and the company's outlook. When it came to valuation, I previously conducted a discounted cash flow analysis to get a price target of $212. I want to now use a different valuation method to try and get a more conservative estimate around the fair value of VLO....
Valero: Growing Free Cash Flow To Support Dividend Growth