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.