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NuStar's Dividend Appears Stuck, But The Company Is Improving

Apr. 08, 2021 11:19 AM ETNuStar Energy L.P. (NS)15 Comments
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Patient Tech Investor


  • At a common share dividend of $1.60 per year, NuStar will likely be cash flow neutral during 2021.
  • The company may produce a cash increase of $150 million during each of the years 2022 and 2023.
  • If an increase in dividend occurs, it's likely to be minor.
  • The health and independence of the company are improving.

Although the petroleum industry experienced an unprecedented challenge in 2020, NuStar Energy (NYSE:NS) met the challenge and its financial health also improved. With the company following financial practices similar to other energy MLPs, understanding a possible future expansion in dividends seems in order. The company transitioned last year from borrowing significant portions of its expansion capital to a mode of self-funding all cash requirements. Its plan also includes a meaningful reduction of its long-term debt. All of this affects available cash for dividends, capital, and expansion.

NuStar Energy was formed when Valero spun off its transportation business in 2006. Over the next 15 years, the company expanded its pipeline business and entered the Permian Basin in 2017 with the purchase of Navigator's Energy Services. One of its unique businesses has been the export of American-produced crude oil from its Corpus Christi terminal. Approximately, half of its business is the transportation of products and the other half is crude oil.

At its February conference, NuStar provided several valuable insights into its progress of the past year and offered investors a glimpse into its future. We included several slides in our review of NuStar.

2020 Financials

Our review starts with a summary of 2020's financial performance.

The above presentation slide summarizes last year with a couple of surprises. Even with a virus-induced downturn, it increased its adjusted EBITDA by 8% without impacting other key performances.

We noticed that NuStar, perhaps purposefully, excluded remarks on its distributable cash flow. But before, the company noted, "For 2020, we expect to generate sufficient cash from operations to fund our distribution requirements, reliability expenditures, and a portion of our strategic capital expenditures."

Some of the investor important expenditures are known. It pays common shareholders $1.60 in dividends on 110 million shares or $175 million. It also pays another $120

This article was written by

Patient Tech Investor profile picture
I have been an investor for several decades enduring the 87 crash, 2000 crash, and 08 crash. I do use trading systems developed with TradeStation. I have enjoyed the rewards from both buy and hold and trading. My professional experiences includes several decades as a process control engineer. I hold a JD from an eastern law school.

Analyst’s Disclosure: I am/we are long NS. 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.

We own a sizable position with short calls either at $20 or $22.5 covering most of the stock. We also actively trade NS.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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