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PSX Continues to Make Shareholder Friendly Moves

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March 10, 2013 – Comments (2) | RELATED TICKERS: PSX

My position in Philips 66 fondly reminds me of a Gramercy Capital moment in my own investing life, making a complete 180 on a company that I initially didn't like but that ultimately turned out to be a very successful investment.  When I originally bought stock in ConocoPhillips (COP) I did so because I thought that the parent company would be better off after it shed its refining assets. However after researching PSX I slowly began to realize that it was actually the more attractive part of the company and not the E&P assets as I had originally had thought. 

Of course in retrospect I wish that I had bought even more shares of PSX than I did, but I suppose that's always the case with big winners ;).  It is up over 130% since I added it to my CAPS portfolio less than a year ago (5/12/13). My real world position is up a little less than that overall, because unlike CAPS building a position in real life is not a one and done proposition.  I added to my PSX stake several times, but it is still good for a substantial gain

Today I came across a Seeking Alpha article by one of the better writers on the site, Todd Johnson.  He, and (I continue to own the stock) both believe that there is still a decent amount of upside left in the company.

This is important because in the recent months I have made it a priority to evaluate every single one of my real money positions and to sell the ones that do not have any remaining catalysts that could cause them to significantly outperform going forward. In fact, I just sold something late last week BWP.  It has a substantial dividend, but absolutely no story or growth that I see causing it to outperform. If I want a massive dividend, I could just consolidate that position to Sprott Resource or UAN, both which have higher yields and better catalysts (both are two of my larger real money positions).

Back to PSX (I seem to do that in my blogs don't I, go off on tangents.  I think that's a good thing because that's where I do some of m best thinking). Todd Johnson thinks that both significant dividend growth and a spinoff of the company's pipeline and storage assets will spur significant growth in the company's share price in over the next year or so.  He claims to still be buying shares. I'm not sure that I'm ready to do that, my ability to overcome price anchoring might not be powerful enough yet...I'm working on it.  However, I continue to happily hold my shares of the company. 

He's not kidding about dividend growth.  PSX has paid three dividends since becoming an independent company, first $0.20/share, then $0.25 and most recently $0.313. Now I realize that the company's ability to generate cash is dependent upon refining spreads and that they're sitting and an extremely high level, but still this shows a willingness by PSX management to be shareholder friendly and not just horde everything for themselves. 

Traditionally I have never been a huge fan of share buybacks, but I'm beginning to warm up to them some, much like I was able to overcome my initial resistance to owning a company in the refining sector. Just last quarter PSX spent $245 million on share buybacks.  Furthermore its Board also doubled its authorized buybacks to $2 billion.

These shareholder friendly dividend increases and buybacks in conjunction with an officially announced plan to spinoff its pipeline / storage assets and the potential for it to spin off additional divisions down the road like chemicals and midstream will likely lead to excellent performance in PSX going forward. 

Phillips 66 Catalysts Include Dividend Growth And MLP Spin-Off

http://seekingalpha.com/article/1260891-phillips-66-catalysts-include-dividend-growth-and-mlp-spin-off?source=google_news

Deej

2 Comments – Post Your Own

#1) On March 11, 2013 at 12:24 PM, ikkyu2 (99.24) wrote:

I bought some a little while ago - last time you posted about it, I think - after reviewing and coming to the same conclusions you did, and I was worried I was late to the party; but no, my shares have been partying too.

Thanks for the update.

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#2) On March 11, 2013 at 1:11 PM, TMFDeej (99.29) wrote:

You're very welcome ikkyu2.  Welcome aboard ;).  As long as refining margins remain high, and cheap domestic oil has been assuring that, PSX should continue to do well.  Even if margins drop some, this company is making some great moves that should benefit owners.

Deej

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