Valero's Dividend May Need To Be Cut If Refined Fuels Demand Remains Weak

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About: Valero Energy Corporation (VLO)
by: Tristan R. Brown
This article is exclusive for subscribers.
Tristan R. Brown
Alternative energy, long/short equity, commodities, energy
Summary

The share price of U.S. merchant refiner and ethanol producer Valero Energy has steadily declined over the last month as the coronavirus has spread rapidly through PADD 3 states.

Refined fuels demand has yet to recover from the spring's severe disruption, and another disruption looms as policymakers reverse states' economic reopenings.

Analysts' earnings estimates for Valero in 2020 and 2021 have declined sharply in recent months as the outlook has continued to deteriorate.

Valero's ability to continue offering its current dividend with its historically-high yield will be hampered so long as the PADD 3 region remains a major COVID-19 hotpot.

U.S. merchant refiner and ethanol producer Valero Energy (VLO) has seen its share price slide over the last month following a major rally that took place in April and May (see figure). The