Phillips 66's Dividend Payment Impresses Amid Macro Risks
Zacks Investment Research | Sep 28, 2016 10:43PM ET
On Sep 28, 2016, we issued an updated research report on Texas-based Phillips 66 (NYSE:PSX) .
Phillips 66 has a remarkable, geographically diversified refinery base. The company’s 14 refineries enable it to participate in various market opportunities and provide an advantage over region-specific competitors. Further, most of Phillips 66’s refineries are integrated with transportation, marketing and commercial operations that provide crude supply flexibility. These refineries benefit from strong margins because of low feedstock costs courtesy of higher proportion of onshore crude sources, which offers a distinct cost advantage over seaborne crudes. Phillips 66 also owns or has interests in three refineries in Europe and one in Asia.
Banking on the aforesaid positives, the company has been able to pay attractive dividends since its spin-off from ConocoPhillips (NYSE:COP) on May 2012. We expect the company to continue increasing dividend payouts in the long run.
Phillips 66 remains focused on improving its supply chain network. For this purpose, the company has invested heavily on transportation and logistics assets. As a result, the company is capable of procuring crude from sources round the globe.
Phillips 66 is expected to direct the majority of its capital expenditure toward Chemicals and Midstream businesses rather than the larger refining and marketing segment. These midstream and chemicals segments are believed to be higher margin and possess stronger growth prospects. The investment for midstream projects will mostly be in the central U.S., where the need for pipeline and other infrastructure is much higher in newer production areas. Investments for Chemicals are likely to be made mostly in the U.S., to gain from low natural gas prices and rising petrochemical demand.
PHILLIPS 66 Price and Consensus
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