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Delek (DK) Boosts Shareholder Return Via Special Dividend

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·3 min read
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Diversified downstream energy company Delek US Holdings, Inc. DK declared a special dividend of 20 cents per share to its common shareholders of record on Jul 12. This cash return, which will be made on Jul 20, reflects DK's consistent operating performance and is the direct result of its disciplined approach to investment amid favorable sectoral trends. Investors should know that this is a special dividend based on free cash flow and the company's ability to keep it going forward is largely dependent on free cash flow generating power.  

This payout is in addition to Delek’s recent stock purchase and cooperation agreement with Carl Icahn and the Icahn Group for the buyback of $64 million worth, or approximately 50%, of Delek US’s common stock owned by the Icahn Group for about $18.3 per share.

The sharp gains in oil prices to over $100-a-barrel have enabled companies to generate strong revenues. Higher commodity prices and a bullish demand picture pushed up free cash flow, allowing energy operators (like DK) to step up shareholder distributions in the form of dividends and buybacks. Delek has also informed that it will look into the possibility of initiating sustained dividend payouts when it comes out with second-quarter results in August.

In particular, refiners (like Delek) have been supported by a marked improvement in refined products consumption — primarily gasoline and diesel — on the back of increasing vaccinations and mobility. In other words, this indicates surging consumption of gasoline, diesel and other refined products. As economic activity takes off and Americans take to the road with a vengeance amid the post-pandemic recovery, refined products’ usage should continue to gain traction throughout 2022. The refiners are also set to benefit from increased summer driving and accelerating international travel.

Zacks Rank & Key Picks

Delek US Holdings is a diversified downstream energy company with an impressive profile of strategically located assets. Its refineries have a combined crude throughput capacity of 302,000 barrels per day. The company also owns approximately 250 convenience stores in Texas and New Mexico locations as well as substantive logistics assets.

Delek currently carries a Zacks Rank #1 (Strong Buy).

Along with Delek, investors interested in the energy space might look at Civitas Resources CIVI, Suncor Energy SU and Earthstone Energy ESTE, each carrying a Zacks Rank of 1, currently.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Civitas Resources is valued at some $5.3 billion. The Zacks Consensus Estimate for CIVI’s 2022 earnings has been revised 35.7% upward over the past 60 days.

Civitas, headquartered in Denver, CO, has a projected earnings growth rate of 368.6% for 2022. CIVI shares have gained around 19% in a year.

Earthstone Energy beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 35%, on average.

Earthstone Energy is valued at around $1.9 billion. ESTE has seen its shares gain around 32.4% in a year.

Suncor Energy is valued at approximately $52.7 billion. The Zacks Consensus Estimate for SU’s 2022 earnings has been revised 21.7% upward over the past 60 days.

Suncor Energy, headquartered in Calgary, Canada, has a trailing four-quarter earnings surprise of roughly 3.6%, on average. SU shares have surged around 42.6% in a year.


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