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Holly Energy Partners, L.P. (HEP)

Company Dividend Discount ModelIndustry: Oil & Gas MidstreamSector: Energy

Valuation Snapshot

Stable Growth$21.11 - $34.29$27.02
Multi-Stage$27.34 - $29.86$28.57
Blended Fair Value$27.80
Current Price$21.96
Upside26.58%
DecisionDon't Buy

Dividend History & Growth Metrics (10Y)

Metric5Y CAGR10Y CAGR2022202120202019201820172016201520142013
DPS-6.24%-7.82%1.341.181.382.162.101.864.041.831.221.10
YoY Growth--13.76%-14.34%-36.15%3.11%12.96%-54.08%121.06%49.39%10.89%-63.65%
Dividend Yield--7.74%6.68%7.22%15.40%7.72%6.73%11.31%5.40%3.89%3.33%

Stable Growth Model (Adjusted)

(USD in Millions except Per Share Data)
Net Income To Common (M)239.26
(-) Cash Dividends Paid (M)177.25
(=) Cash Retained (M)62.00
MetricLOWBASEHIGH
Required Retention Ratio20.0%12.5%7.5%
(=) Cash Required (M)47.8529.9117.94
Cash Retained (M)62.0062.0062.00
(-) Cash Required (M)-47.85-29.91-17.94
(=) Excess Retained (M)14.1532.1044.06
(/) Shares Outstanding (M)126.44126.44126.44
(=) Excess Retained per Share0.110.250.35
LTM Dividend per Share1.401.401.40
(+) Excess Retained per Share0.110.250.35
(=) Adjusted Dividend1.511.661.75
WACC / Discount Rate9.10%9.10%9.10%
Growth Rate1.80%2.80%3.80%
Fair Value$21.11$27.02$34.29
Upside / Downside-3.86%23.05%56.13%

Multi-Stage Model: Projections

(USD in Millions)
MetricTTMDec-27Dec-28Dec-29Dec-30Dec-31Terminal
Net Income (M)239.26245.95252.84259.92267.19274.67282.91
Payout Ratio74.08%77.27%80.45%83.63%86.82%90.00%92.50%
Projected Dividends (M)177.25190.04203.41217.38231.97247.20261.69

Multi-Stage Valuation

MetricLOWBASEHIGH
WACC / Discount Rate9.10%9.10%9.10%
Growth Rate1.80%2.80%3.80%
Year 1 PV (M)172.50174.20175.89
Year 2 PV (M)167.59170.90174.24
Year 3 PV (M)162.57167.40172.34
Year 4 PV (M)157.46163.74170.21
Year 5 PV (M)152.32159.94167.88
PV of Terminal Value (M)2,644.192,776.642,914.34
Equity Value (M)3,456.623,612.823,774.89
Shares Outstanding (M)126.44126.44126.44
Fair Value$27.34$28.57$29.86
Upside / Downside24.49%30.12%35.95%

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