Valero Energy Corp. increased its dividend by 20 percent, bucking the trend of energy companies slashing payouts to conserve cash during a prolonged oil-price slump.
The dividend will be raised to 60 cents from 50 cents a share, the San Antonio-refiner said in a statement Thursday. The increase raises the annualized cash payout rate on Valero’s common stock to $2.40 per share.
U.S. refiners have fared better than other parts of the energy industry during the downturn, as cheaper crude prices have boosted their margins. A Bloomberg Intelligence index of refiners and marketers is little changed since the beginning of 2015, while an index of investment-grade producers has fallen by half.
West Coast refiners saw the best margins in 2015 as Exxon’s Torrance operated at reduced rates for most of the year. Gasoline demand was higher than expected, which has also helped retail margins as more people filled up and went into stores. Valero has two plants in California, one near San Francisco and the other near Los Angeles.
This year may be slightly different for refiners with margins not as high as last year, according to Bloomberg Intelligence analyst Gurpal Dosanjh.
“Brent falling below WTI may depress refinery margins,” Dosanjh said. “Valero’s large dividend increase, markedly increasing the yield, may be in response to potentially weaker margins.”