Key Points
- Delek Logistics Partners insiders are buying the stock; it pays over 10% in yield.
- Analysts activity provides a tailwind for the price action, suggesting a 10% to 15% upside is possible.
- Institutions are buying on balance; their activity aligns with a higher stock price outlook.
Insiders are buying high-yielding Delek Logistics Partners (NYSE: DKL). There’s no guarantee, but the buying affirms the dividend health, which is significant given the high yield. Delek Logistics Partners is a limited partnership in the energy industry, paying a sizeable portion of its earnings as dividends and yields over 10% with shares near a multi-year low. The buyers include the president, an EVP, an SVP, two purchases by the CFO, and a director. They own about 1.0% of the stock in total, which is not much of a tailwind, but other forces in play also support the stock price.
Institutions and Analysts Support a Floor for Delek Logistics Partners
Institutional interest in Delek Logistics Partners is light at 12% but is growing on balance. Net inflows more than doubled the pace of outflow from October 2023 to October 2024, aligning with the market bottom and price floor near $36.50. Institutional owners are diverse, including some big names like B. Riley Wealth Advisors, Susquehanna Fundamental Investments, and BNP Paribas, although none are significant holders.
Retail investors own another 16%; the remainder is held by the parent company, Delek US (NYSE: DK), a diversified downstream energy company operating refineries, pipelines and terminals, and delivery infrastructure. Delek Logistics Partners is the pipelines and terminals segment. It’s not a coincidence that the companies have numerous executives in common, including the CFO and CEO/President, who also bought shares in the parent this year.
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Analysts' activity in 2024 is mixed but aligns with a floor for the price action and an outlook for higher prices over time. The four reports tracked by Insidertrades.com are not many but were all issued in 2024 and show increasing interest, if not a bullish bias, with two initiated coverages. The one outlier rated the stock as a sell with a price target of $36, the lowest issued by analysts, aligning with the technical floor and institutional activity.
However, the analysts also show a bullish bias with two upgrades to Buy, one increased price target, and three price targets in the range of $45 to $46, about 6% above the consensus and 16% above the critical support target. The one outlier rated the stock as a sell with a price target of $36, the lowest issued by analysts, aligning with the technical floor and institutional activity. Citigroup’s Douglas Irwin recognized risks but said the high yield and growth were too hard to ignore when he issued his upgrade in August.
Capital Returns Flow From Delek Logistics Partners
Delek Logistics Partners pays a solid dividend yielding more than 10%. The payout runs more than earnings and has a payout ratio above 100%, but that is not an issue. The company is a partnership, so the distributable cash flow is what counts, and that is sufficient to sustain the dividend, capital allocation plans, and healthy balance sheet. DCF in Q2 2024 provided a 1.32x coverage ratio, aligning with an outlook for distribution increases. Revenue and earnings also align with that outlook, with revenue forecasted to grow by 10% in 2025 and distributable cash flow at a faster pace.
The price action in Delek Logistics Partners weakened in October when the company announced a unit offering. The offering priced the units at $39, below the pre-announcement price of $44 but well above the price floor at $36.50, which remains intact. A break of that level may result in a more profound but unexpected decline. The more likely scenario is that a price move to $36.50 or lower will trigger an inflow of capital, including institutional and retail dollars. In that scenario, a buying signal will likely form, leading to higher prices. The risk is that units of DKL will remain range-bound below $45 until more news is available.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Delek US (DK) | $15.94 | -1.2% | 6.40% | -3.28 | Reduce | $21.00 |
| Delek Logistics Partners (DKL) | $40.49 | +1.3% | 10.87% | 14.36 | Moderate Buy | $44.00 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
