A High-Paying Dividend Stock With Excellent Long-Term Outlook

| About: Alon USA (ALDW)
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Alon USA Partners LP (NYSE: ALDW) (or Alon) is a true gem with an excellent dividend, and an appreciation in the stock price. Alon's stock price opens today (25 Jun 13) at $22.61. With the last dividend at $1.48 per share that would be a $5.92 dividend per year and 26% dividend return. And the bonus to this investment is we anticipate the stock price to rise to near $30 before the next dividend payment in August 2013. There are some investors that will wait to buy in, but the golden opportunity is now.

Alon USA Partners, LP was formed when Alon USA Energy (NYSE: ALJ) created a variable rate master limited partnership (MLP) to own the Big Spring Refinery in Texas and its related pipeline and storage facilities. Alon went public in November 2011 and over the first twelve months created a revenue of $3.3 billion and net income of $337 million. During the 1Q 2013, Alon increased its earnings to $93.5 million or $1.50 a share, compared to $48.1 million in 1Q 2012. Cash flow improved 66% to $116 million.

Alon also had a tax advantage that is noteworthy, only 50% of the cash dividend is taxed through 2015 since 50% is accounted for as repayment of capital. ALDW investors have a major advantage on a dividend basis.

The Big Spring Refinery was Alon USA Energy's best asset and biggest single contributor to EBITDA in recent history. As part of the deal, Alon US Energy transferred a $250 million term loan to ALDW.

Alon conducts three major business operations, a refinery, asphalt business operations and retail and brand marketing. The asphalt is one of the largest suppliers of high-performance asphalt products in the country; a fully integrated network of asphalt facilities from Texas to the West Coast.

Retail/Brand Marketing is through Alon Brands, as the company operates more than 300 7-Eleven convenience stores, and market and supply ALON motor fuels to more than 900 independent and company-owned retail locations.

The company's main asset is a refinery that is capable of processing 70,000 barrels of crude oil a day. Located in the West Texas city of Big Spring. This refinery was essentially rebuilt from the ground up after a fire in 2008, making it among the most modern in the industry. Alon also owns and operate crude refineries in California and Louisiana, with an aggregate crude oil throughput capacity of approximately 250,000 barrels per day.

The latest statement from the Energy Information Administration, expects daily production in the Permian Basin to rise from 1 million barrels in 2011 to 1.55 million barrels by 2014 and 2 million barrels in 2015. A lack of pipeline infrastructure limits the movement of Permian crude out of the area, allowing Alon to purchase crude supplies at a discounted price.

Big Spring refines West Texas crude both sour and sweet. Eighty percent of its feedstock is sour crude which is a cost advantage versus its competitors. The big advantage for the refinery is its ability to run sour crude, which is more difficult to process (but cheaper to purchase) because of its greater levels of impurities. With one of the most modern refineries built, it has the capability to handle the sour crude effectively. Alon will benefit because sour crude makes up an increasing portion of domestic and global production. Big Spring is located inland as opposed to many of its competitors on the coast giving it an advantage in both proximity to lower cost feedstock (NYSEARCA:OIL) and access to its customers.

Alon also capitalizes on a rare opportunity of limited transportation pipeline infrastructure in Permian Basin which limits the movement out of the area and allows Alon to purchase at a discount, and is coupled with advantages of owning a captive distribution system.

Big Spring refinery had a 97% utilization level up through the filing in 4Q 12, and utilization of 88.3% in 2011. Big Spring refinery has the capacity of 83,000 barrels per day but only refining 68,400 barrels per day. Half of production is gasoline, 33% is diesel and jet fuel, 7% asphalt and the remainder petrochemicals and small amount of other products.

Alon has solid leadership focused on the long-term business goals, established good business operations, a profitable balance sheet and growing cash fund. All this translates into continued high dividends, an increase in stock valuation and solid outlook for the future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Although I don't own any stock now, I do plan to purchase in the near future. Research this stock and all investments before buying.