Dividend Increase: Marathon Petroleum Corporation (MPC)

Marathon Petroleum Corp (MPC) announced a nice 12.5% increase to their dividend today, bringing the new quarterly amount to $0.36 per share up from the previous $0.32 and has been steadily increasing it’s dividend since 2011.  Taking into account the new dividend, the new yield on MPC will reflect a 3.80% yield.

MPC was formed as a spin off from Marathon Oil (MRO) to separate the refinery business from the exploration of MRO back on June 30, 2011.

There’s nothing exciting about the refinery business, except that we need it.  MPC is the 3rd largest refiner in the nation.

Earlier this year, MPC did say the rate at which they increase their dividend will be slowed due to lower oil prices, so it’s 25% average increase will probably be higher than what you should expect with sub $50 oil (maybe until oil establishes a range in the $70 area even).  I’m fine with that as I expect a 10% dividend growth rate to be sustainable for a while and would prefer a conservative growth policy.

Here is some information on the dividend that I have put together.  All data collected from MPC investor site:

As you can see the quarterly dividend has grown at an impressive 25.76% since the MPC spinoff.  Total annual dividend payments received grew at 28.98% reflecting the timing of dividend increases.  This will not be sustainable forever, hence the companies decision to slow the rate of growth.

Some data on the company:

Market Cap: $20Billion

P/E Ratio: 10

Beta: 1.5

Profit Margin 3.27%

Total Cash: $308million

Total Debt: $11.57Billion

Payout Ratio: 33%

While I tend to shy away from such a low margin, high debt company, I do like the conservative payout.  As the oil glut works it way out of the system, margins should improve, but this is also a volume based business.

Now a comparison of MPC vs S&P500:

Up until recently, MPC was destroying the S&P500.  But when the commodity your industry is tied to goes down the crapper, your stock price is also going to be affected.  MPC has outperformed the S&P500 since the spin off none the less.

I am long MPC for about the next decade (at least)

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