HollyFrontier (HFC) is one of the largest independent petroleum refiners in the U.S. Through six complex refineries (which process lower-cost heavy sour crude into a higher percentage of fuel), its subsidiaries produce and market gasoline, diesel, jet fuel, asphalt, heavy products and specialty lubricant products.
HFC shares have been hit along with the rest of the energy space, and the firm saw its Q4 performance impacted by the narrowing price gap between Brent and West Texas Intermediate crude.
However, the WTI/Brent spread has once again widened and management believes the firm is well positioned to reap the benefits, given its geographic location close to inland U.S. crude production, improving reliability and throughput, and limited amounts of planned maintenance scheduled for 2015.
We also like that HFC owns a 39% stake in and receives meaningful cash distributions from high-quality logistics MLP, Holly Energy Partners.
Though the share price has recently been volatile, we like the strong competitive position and shareholder-friendly management.
While most publications will show a 3.4% yield for HFC, if special dividends (which have been paid since Q3 2011) are included, the actual annual payout rate is 8.1%.
John Buckingham, The Prudent Speculator, www.theprudentspeculator.com, 877-817-4394, April 2, 2015
