HollyFrontier Corporation (HFC) is growing its dividend and has been offering special dividends on a regular basis, powered by its pure-play strategy of supplying the strong demand growth from the Rockies with its refined products, which are refined from some of the cheapest crudes in the market, says Paul Sankey, Analyst at Deutsche Bank Securities Inc.
“On HollyFrontier, basically what you are looking at is a Rockies refiner, and what you have in the Rockies is proximity to the cheapest crudes from growth in Canada and growth in the Bakken and other midcontinent areas as well as exposure to a lot of steady strong demand growth from strong Rockies demographic growth and industrial activity,” Sankey said.
Sankey says HFC benefits from the lack of enough domestic refineries, especially as there isn’t much imported-oil activity in its geography, allowing this refiner to take the cheap crudes available in the region and turn them regularly into more than one special dividend per quarter.
“What we want from refining, as you see it’s a low growth business, is cash returned to shareholders. We are not interested in guys who buy assets, we are not interested in guys who spend a lot of money to expand their refineries; we are interested in companies that pay out cash. And let’s say for HollyFrontier — ticker HFC — its ticker should instead be ATM,” Sankey said.
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