- HollyFrontier defied the pressure of 2020 and managed to sustain their dividends despite the Covid-19 downturn, but this may not last throughout 2021.
- Whilst the impact to their operating cash flow from this downturn is not new, they are doubling their capital expenditure for 2021 and thus further stretching their dividend coverage.
- No one knows whether operating conditions will recover sufficiently and thus they will likely need to lean on their financial position if they are to support their dividends.
- Whilst their leverage is only moderate, without operation conditions recovering they could have to choose between sustaining their dividends and projecting their balance sheet.
- Given this situation, I believe that a neutral rating is appropriate.
For further details see:
HollyFrontier: Dividends Survived 2020 But Maybe Not 2021