Refiner Dividends: The Bad News Keeps Coming

The bad news regarding dividends just keeps coming out of the oil and gas refining sector. Last month, we told you about Sunoco (SUN) slashing its dividend by 50%. Unfortunately, that reduction appears to have been just the tip of the iceberg as Sunoco rival Tesoro (TSO) followed suit yesterday.

Despite the fact that Tesoro reported third-quarter results that beat Street estimates, the results were still 87% below the year-earlier period and that led a dividend cut of 50% by Tesoro. Tesoro will now pay a quarterly of 5 cents a share.

Valero (VLO) another major U.S. refiner, has not announced a dividend cut... yet. That said, the company has cautioned a dividend cut is possible if market conditions do not improve. With this trio of companies not expecting a recovery until 2010 at the earliest and an ever-increasing rise in oil inventories, this is not a safe place for dividend investors to be. Sunoco and Tesoro have proven that and may only be a matter of time before Valero does the same.

Comments

[jarco:]

Bonds continue to look attractive in this space. Yields are predictably higher than any other high value asset plays.

Disclosure: Own TSO and VLO bonds with 2011-2012 maturities

Nov 13 12:05 PM