* Planning likely spin-off of retail business * Q2 profit $1.50 per share vs $1.30 a year earlier * Shares up 6 percent * Q2 profit tops Street By Matt Daily and Anna Driver July 31 (Reuters) - U.S. refining company Valero Corp o n T uesday posted a higher quarterly profit that topped expectations and said it would split off its retail business, lifting its shares 6 percent. The company, which owns retail stations in the United States and Canada, said it is considering different methods for the split, including a spin-off that would give its shareholders ownership in the retail business. "This aligns perfectly with what investors want to see from Valero right now, which is return of capital and liquidity events. That's why it is being met with a positive response," said Dahlman Rose & Co analyst Sam Margolin, who rates the shares a "Buy." Retail businesses similar to Valero's trade at higher valuations than refining companies, so spinning off the stores will help unlock value. Valero's retail business has an enterprise value of around $3 billion to $4 billion, analysts said. Valero will keep its wholesale fuel marketing business and shed its stores that sell gasoline and convenience store items like soda and candy bars, marking a departure from some of its peers like Tesoro Corp who are growing retail operations. "We are the manufacturing company with a wholesale marketing business," Valero Chief Executive Officer Bill Klesse told investors on a conference call. "We are not going to be selling Twinkies and beer and cigarettes. We are going to leave that to the retail group." Retail outlets are typically viewed as an outlet for fuels produced at a company's refineries. Those stores allow refiners to keep utilization rates up even when demand slows, a situation that puts them at an advantage to competitors without stores. "Valero isn't going to have that guaranteed offtake, but it sounds as if they can make it up with their wholesale business and exports," Allen Good, analyst at Morningstar, said. Valero operates nearly 1,000 U.S. stores, with a heavy concentration in Texas. In Canada, it has 775 units, the company said. Credit Suisse Securities (USA) LLC is advising Valero in connection with the retail split, which is expected to take 6 months. San Antonio-based Valero reported a second-quarter profit of $831 million, or $1.50 per share, compared with $745 million, or $1.30 per share, a year earlier. Analysts on average had expected a profit of $1.43 per share, according to Thomson Reuters I/B/E/S. "In the refining segment, throughput and cash operating expenses performed better than company guidance," analysts at energy investment bank Simmons & Co told clients in a research note. Valero said its retail arm reported record quarterly operating income of $172 million, up from $135 million a year earlier, or about 12.6 percent of its second-quarter profit. The company also raised its quarterly dividend by 17 percent to 17.5 cents per share. Shares in Valero rose 6 percent to $27.72 in New York Stock Exchange trading.