The board of directors of Marathon Petroleum Corporation (MPC - Free Report) recently approved a 15% hike in its quarterly dividend. The company will now reward shareholders with a dividend of 46 cents per share compared with 40 cents earlier. This translates to an annualized dividend of $1.84 per share. The increased dividend will be paid on Mar 12, 2018 to shareholders of record as of Feb 21, 2018.
What Led to the Hike?
The oil refining and marketing giant was able to pull off the dividend hike due to the strategic actions it undertook last year for generating long-term cash flow. Notably, Marathon Petroleum's $8.1 billion drop-down deal with MPLX LP (MPLX - Free Report) bodes well for the company as it will lead to huge cash influx, boosting dividend and buyback programs. Moreover, the recent tax reform by the U.S. government has reduced the company's cash burden, leading to the hike.
Why Marathon Petroleum Deserves Attention?
Marathon Petroleum is known for raising dividends since it became a standalone public company in mid-2011. Additionally, it has an active share repurchase program. These highlight the company’s commitment to return more value to shareholders. Notably, the dividend hikes and buybacks, since the company's inception, have totaled $13 billion.
Moreover, the financial flexibility and a strong balance sheet of Marathon Petroleum – which will release its fourth-quarter and full-year 2017 results on Feb 1, 2018 – are its real assets gives it an edge over other companies in the industry. In addition, the company’s return on equity (ROE) of 8.5% is much higher than the industry’s 7.9%.
Also, Marathon Petroleum has gained 45.1% in the last year compared with 28.2% growth of its industry.
About the Company
Findlay, OH-based Marathon Petroleum is a leading independent refiner, transporter and marketer of petroleum products. The company, in its current form, came into existence following the 2011 spin-off of Houston, TX-based Marathon Oil Corporation’s refining/sales business into a separate, independent and publicly-traded entity. Marathon Petroleum operates in three segments: Refining and Marketing, Speedway (Retail), and Pipeline Transportation.
Marathon Petroleum recently took the final call of retaining its retail network unit — Speedway LLC — as a fully-integrated business within the company. Holding on to the Speedway, which contributed around a quarter of the company's total earnings in 2016, will help in generating long-term returns for shareholders. The segment is well poised for solid earnings and growth on healthy merchandise margins.
Zacks Rank and More Stocks to Consider
Marathon Petroleum sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the oil and energy sector are Suncor Energy Inc. (SU - Free Report) and Pioneer Natural Resources Company (PXD - Free Report) . Both the companies sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Suncor Energy is a Calgary, Canada based integrated energy company. Its revenues for the fourth quarter of 2017 are expected to increase 5.5% year over year. The company delivered a positive earnings surprise of 57.7% in the third quarter of 2017.
Irving, TX- based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its earnings for the fourth quarter of 2017 are expected to increase 49.1% year over year. The company delivered a positive average earnings surprise of 67.6% in the last four quarters.
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