This 20% Dividend Looks Like a Trap… Unless You’re Carl Icahn

This 20% Dividend Looks Like a Trap… Unless You’re Carl Icahn

Carl Icahn isn’t new to volatility. The 88-year-old billionaire investor has made a career out of doubling down when others pull back. And now, just eight months after being charged by the SEC for allegedly “forgetting” to disclose billions in loans backed by his publicly traded empire (you know, nothing major), he’s back making headlines. This time, it’s for quietly adding to his already rich stake in CVR Energy, a refining company he controls through his holding company, Icahn Enterprises.

Carl Icahn

On Friday, Icahn spent another $4 million to scoop up shares of CVR, paying between $16.62 and $16.78 apiece. That brings his total ownership to nearly 70 million shares… meaning at this point, if you call CVR’s corporate office, there’s a decent chance Carl himself answers the phone.

If you’ve never heard of CVR Energy, it’s basically a fossil-fueled throwback to an era before ESG reports were longer than annual earnings. They’re based in Texas and do a little bit of everything that would make a climate activist twitch. They refine crude oil into gasoline, produce diesel, market fuels, and manufacture nitrogen-based fertilizer through their ag-focused arm, CVR Partners. In other words, if you’ve filled up your truck or fertilized your cornfield, CVR probably had something to do with it. It’s the kind of old-school, cash-heavy operation that Icahn tends to love… asset-rich, operationally based, and definitely not trying to win any sustainability awards.

Carl Icahn

With that said, CVR isn’t exactly a popular stock right now. Shares are down 47% over the last 12 months and currently trades at $18… well below where Icahn just bought. Revenue fell nearly 18% year-over-year in 2024 to $7.61 billion. Net income dropped from $769 million to just $7 million. Earnings per share collapsed from $7.65 to just $0.06. Not the profile of a thriving business. But there are a few reasons Icahn might be leaning in anyway.

First, CVR still generates serious cash flow. In Q4 alone, the company posted $1.95 billion in revenue, beating analyst expectations, and reported an operating cash flow of $98 million. That cash helped them strengthen liquidity, adding $408 million to the balance sheet through a term loan and asset sales, including their 50% stake in the Midway Pipeline.

Carl Icahn

Second, the dividend. Even with its challenges, CVR continues to reward shareholders. It declared a quarterly dividend of $1.75 per share… translating to a 20%+ annual yield. That payout, while arguably unsustainable long-term, is likely appealing to someone like Icahn, who’s known for favoring income-generating businesses.

Third, market positioning. The global refining space is under pressure…  demand’s been soft, EV adoption keeps climbing, and long-term fuel consumption is clearly on the decline. But this is exactly the kind of setup Carl Icahn seems to love. He’s built a reputation on jumping into cyclical businesses when they’re out of favor. And some analysts still see about 30% upside from current levels (so that’s something to pay attention to).

Carl Icahn

Lastly, control. By increasing his stake, Icahn solidifies his grip on the company’s strategic direction. Two new directors (Robert Flint and Colin Kwak) were recently added to CVR’s board, both tied to Icahn Enterprises. With that kind of influence, he can shape the company’s next moves in a sector that may be forced to consolidate or shift its strategy in the coming years.

Usually when a company pays a double digit dividend, it’s a “run for the hills” kind of situation, but CVR might be an exception based on how cheap it’s trading for.

Stock.News does not have positions in companies mentioned.