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01/09/2014 9:00 am EST


John Buckingham

Editor, The Prudent Speculator

For his top income investment for the coming year, value investing expert John Buckingham, editor of The Prudent Speculator, looks to one of the nation's largest independent petroleum refiners.

HollyFrontier (HFC) has refining operations throughout the Midwest, Southwest, and Rocky Mountain regions.

Through five complex refineries (which allow Holly to process lower-cost heavy sour crude into a higher percentage of fuel), its subsidiaries produce and market gasoline, diesel, jet fuel, asphalt, heavy products, and specialty lubricant products.

We like that its refineries are in good locations, with relatively easy access to multiple pipeline networks, and that it sells its products in some of the fastest growing markets in the country.

We believe the combination of refinery complexity, crude flexibility, and growth markets gives HFC strong competitive advantages. The firm generates strong free cash flow, augmenting a superb balance sheet, and supporting healthy regular and special dividends.

While most publications will show a 2.5% yield for HFC, including special dividends (that have been paid since Q3 2011), the actual payout rate approaches 7%.

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