VLO increased dividend by 12.50%

VLO increased the dividend by 5.88% making this dividend champion‘s 9th consecutive dividend increase.

The old dividend rate was 3.20 annual dividend payout (0.8 quarterly), the new rate is 3.60 (0.9 quarterly).

Our current fair value of the company is $81.97 a share so at the current price of $82.33 the stock is overvalued and in order for this stock to be marked a “buy” the three conditions must be met for us to buy the stock.

The three conditions that the stock must meet are:

1) in a correction mode – pass
2) the current stock price must be below a fair value – fail
3) the 5 year average dividend yield must be lower than the current yield – pass

Since only two of the conditions are met, we mark it a “hold”.

The current yield is 4.37%.

The 10 year YOC would be 71.89% with no dividend reinvestment and 360.44% with DRIP. This rapid growth is something which worries me a bit as I think it is too steep so be prepared to possibly see a decline in this growth. On the other side, I do not think this makes the dividend safety endangered.

The company share price outperforms the S&P 500 index long term. If you invested 10,000 dollars in 1995 and held for 23 years, the stock average total return would be 16.37% vs 8.74% of the index.

This make this stock a great source of income but also provide a great source of growth making this a good stock for dividend portfolio accumulation and growth phase. If you are looking for both – dividend yield, dividend growth, and capital appreciation outperforming the index, then this stock is for you.

Note, that during accumulation phase, I recommend seeking both – the dividend growth and capital appreciation. If you are a retiree and plan on living solely from your dividends then you do not need capital growth and this income stock is a safe investment.

 
Disclosure: Currently, I am long VLO and own shares of this company. It is in our watch list and when it appears as “buy” we may buy more shares of this stock.

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