Buyback Wednesdays – Valero Energy’s $2.5 Billion Buyback Plan

Stock buyback announcements continued to stay muted last week with only 6 companies announcing buybacks. We still have a few days left for earnings season and can expect to see an increase in buyback activity in the coming weeks.

Three of the six companies that announced buybacks last week belong to the energy sector. The most significant one was Valero Energy (VLO). On Thursday, July 7, 2022, the Board of Directors of Valero Energy approved a new share purchase authorization of up to $2.5 billion of its common stock, which replaces its previous purchase authorization announced on January 23, 2018. Valero has purchased approximately 45.4 million shares of its common stock since 2018 and retired 5.56% of their shares outstanding after adjusting for dilution. While this might not seem much, the company bought back shares at a very difficult time for the energy sector.

For the first quarter of 2022, Valero Energy reported net income of $905 million, or $2.21 per share, compared to a net loss of $704 million, or $1.73 per share, for the first quarter of 2021. Net cash provided by operating activities was $588 million in the first quarter of 2022.  Its annual long-term total payout ratio is between 40% and 50% of adjusted net cash provided by operating activities. The current yield is 3.74% and I would not be surprised to see the dividend go up in the next few quarters.

The company also returned $545 million in cash to stockholders in the first quarter, with $401 million paid as dividends and $144 million in stock buybacks. It has $8.93 billion in net debt.

                                                                                             Valero Energy (VLO) 

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