HF Sinclair's Cash Flow Increases The Safety Of Its Dividend Yield

Core Insights - The article highlights HF Sinclair as a featured stock in the Safest Dividend Yields Model Portfolio, emphasizing its strong dividend yield and financial performance [2][3][6] Performance Summary - The Safest Dividend Yields Model Portfolio outperformed the S&P 500 by 5.1% on both price return (+6.6% vs. +1.5%) and total return (+7.0% vs. +1.9%) from June 18, 2024, to July 17, 2024 [4] - Among the 18 stocks in the portfolio, 8 outperformed their respective benchmarks during the same period [4] Company Overview: HF Sinclair - HF Sinclair's Core Earnings reached $1.5 billion in the trailing twelve months (TTM) ending Q1 2024, marking the highest level since 2013, excluding record highs in 2022 and 2023 [6] - The company has achieved compounded annual growth rates of 4% in revenue and 7% in Core Earnings from 2013 to the TTM ending Q1 2024 [7] Financial Metrics - HF Sinclair's regular dividend increased from $0.33 per share in Q2 2019 to $0.50 per share in Q2 2024, resulting in a current annualized dividend yield of 4.0% [8] - The company generated $6.0 billion in free cash flow (FCF) from 2019 through Q1 2024, significantly exceeding the $1.2 billion paid in dividends during the same period [8][9] Valuation Insights - HF Sinclair's current price of $350 per share corresponds to a price-to-economic book value (PEBV) ratio of 0.5, indicating market expectations of a 50% decline in NOPAT from TTM levels [10] - Even under conservative projections, the stock could be valued at $72 per share today, representing a 20% upside potential [11] Adjustments and Analysis - Significant adjustments were made to HF Sinclair's financial filings, including nearly $800 million in income statement adjustments and over $1.5 billion in balance sheet adjustments [12][13]