CrossAmerica Partners LP’s $0.525 Dividend: Stability Amid Mixed Signals

CrossAmerica Partners LP (CAPL) has reaffirmed its commitment to unitholders with its latest quarterly dividend of $0.525 per unit, maintaining the same payout since at least early 2024. This distribution, which annualizes to $2.10 per unit, underscores the company’s focus on steady returns. However, the decision arrives amid mixed signals: declining net income trends, volatile stock performance, and divergent institutional investor activity. Below, we dissect the sustainability of this payout and its implications for investors.

Dividend Sustainability: A Delicate Balance

The dividend’s sustainability hinges on CrossAmerica’s ability to generate consistent cash flows. While the company has reliably distributed $0.525 quarterly since at least Q4 2023, recent financial trends raise questions.

• Net Income Decline: In 2024, CrossAmerica reported a full-year net income of $22.45 million, a 47% drop from 2023’s $42.59 million. Even Q4 2024 net income fell slightly short of its 2023 level, reaching only $16.86 million versus $16.74 million.
• Sales Pressure: Annual sales dropped to $3.78 billion in 2024 from $4.09 billion in 2023, reflecting broader challenges in the energy sector.

While the dividend itself is unchanged, the shrinking net income suggests a rising payout ratio—the proportion of earnings paid out as dividends. Without Q1 2025 earnings data (due May 7), precise calculations are impossible, but the trend hints at tighter margins.

Stock Performance: Volatility Shadows Stability

CrossAmerica’s stock price has oscillated sharply in 2025, with the dividend announcement on April 22 failing to deliver a sustained boost.

• April 22: The dividend announcement coincided with a close of $23.12, down from the prior day’s $23.63.
• April 24: The stock closed at $23.84, but volumes remain low compared to peers, reflecting limited investor urgency.

The stock’s 12-month forecast of $23.79 (as cited in the data) suggests analysts see little upside, reinforcing concerns about stagnant growth.

Institutional Sentiment: A Divided Crowd

Institutional investors have sent mixed signals about CrossAmerica’s prospects:

• Bullish Moves:
• BlackRock and Cambridge Investment Research Advisors added positions, betting on the dividend’s stability.

• Mirae Asset Global ETFs increased holdings by 5%, signaling confidence in the company’s operational resilience.

• Bearish Moves:

• Morgan Stanley slashed holdings by 36.7%, while Citadel Advisors reduced its stake by 65%, suggesting skepticism about growth prospects.
• Franklin Resources exited entirely, liquidating its $279,000 position, a stark vote of no confidence.

This split reflects a market unsure whether CrossAmerica can pivot from survival mode to growth mode.

Tax and Structural Challenges

Non-U.S. investors face a 100% federal income tax withholding on distributions, as CrossAmerica’s income is deemed “effectively connected” to U.S. operations. This complicates foreign investment and reduces liquidity, a key drawback for global portfolios.

Operational Strengths and Risks

• Scale and Partnerships: CrossAmerica operates 1,600 fuel locations across 34 states and ranks as ExxonMobil’s top distributor by volume. These ties provide stability but also dependency—any disruption in major brand relationships could destabilize cash flows.
• Debt Management: While not explicitly mentioned in the data, consistent dividends suggest manageable debt levels. However, without balance sheet details, this remains speculative.

Conclusion: A Dividend for Defenders, Not Dreamers

CrossAmerica’s $0.525 dividend is a safe bet for income-focused investors seeking stability in a volatile sector. The payout’s consistency aligns with its role as a midstream fuel distributor, leveraging long-standing partnerships to maintain cash flows.

However, the shrinking net income and institutional hesitancy suggest this is a “defensive” play rather than a growth story. With a 2024 payout ratio likely exceeding 90% (if earnings remain flat), there’s little room for error.

For now, CrossAmerica remains a hold for income investors willing to overlook growth stagnation. But until Q1 2025 earnings (due May 7) reveal a rebound in profitability, aggressive bets may be premature.

Final Take: The dividend is sustainable for now, but CrossAmerica’s future hinges on reversing its declining earnings trend—or at least stabilizing it. Investors should monitor the May 7 earnings report closely for clues.