Marathon Petroleum Corp (MPC) announced a nice 9.43% increase to their dividend , bringing the new quarterly amount to $0.58 per share up from the previous $0.53 and has been steadily increasing it’s dividend since 2011. Taking into account the new dividend, the new yield on MPC will reflect a 4.38% 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.
Back in 2016, MPC did say the rate at which they increase their dividend will be slowed due to lower oil prices, so it’s 20% average increase has steadily declined the last few years. I expect around 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 20.53% since the MPC spinoff. Total annual dividend payments received grew at 22.46% 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: $34.37Billion
P/E Ratio: 7.50
Profit Margin 2.517%
Total Cash: $1.52billion
Total Debt: $31.39Billion
Payout Ratio: 44.18%
While I tend to shy away from such a low margin, high debt company, I do like the conservative payout. They have also done some work on reducing their debt the last 4 years and cut debt in half, while raising their cash in the piggy bank. It would be nice to see oil get above $70 and stay for a bit, but we may be waiting a while. Until oil rises, margins won’t improve, and this is a volume based business.
Now a comparison of MPC vs S&P500:
Up until the last couple years, 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. The above chart also does not reflect dividends received
I am long MPC. I think with the recent pullback, someone willing to wait out oil prices can collect a nice steadily growing dividend and benefit long term from a turn around in oil prices. Also, an investor looking for income can see some good growing income from a company like this. Investors holding long term since 2011 have seen their dividend grow almost 500%.Follow me on the social medias: