Valero Energy Corporation (VLO), HollyFrontier Corp (HFC), Western Refining, Inc. (WNR): 3 Refiners With Potential Upside

Western Refining, Inc. (NYSE:WNR) also has a lower valuation than Valero Energy Corporation (NYSE:VLO). The market values Western Refining at 2.87 times trailing EBITDA. Western Refining operates in several regions, including El Paso and Gallup, New Mexico. Investors might like Western Refining due to its recent significant increase in dividend. Recently, the company’s board announced a 50% hike in its dividend, from $0.12 per share in the second quarter to $0.18 per share in the third quarter of 2013. At the current trading price, its dividend yield is around 2.40%.

In the first quarter, it also issued lower cost debt, at around 6.25%, to pay off older 11.25% senior secure notes. This move has effectively reduced its interest expense by $15 million. Looking forward, the company should take advantage of the crude oil cost by capitalizing on Delaware and San Juan Basin logistics opportunities. It also thinks of developing El Paso expansion project and the traditional MLP formation for its logistics assets. Simultaneously, Western Refining, Inc. (NYSE:WNR) will focuses on cost savings with SG&A initiatives and working capital reduction.

My Foolish take

Valero Energy Corporation (NYSE:VLO), with the upcoming pipeline to transfer cheap domestic inputs, could improve its profitability in the near future. Interestingly, HollyFrontier Corp (NYSE:HFC) and Western Refining, Inc. (NYSE:WNR) have lower EBITDA multiples than Valero, with higher total yields and dividend yields. With low valuations, decent cash return to shareholders, all three refiners might experience a good run-up in the near future.

Anh HOANG has no position in any stocks mentioned. The Motley Fool owns shares of Western Refining.

The article 3 Refiners With Potential Upside originally appeared on Fool.com.

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