Marathon Petroleum’s (NYSE:MPC) Shareholders Will Receive A Bigger Dividend Than

Marathon Petroleum Corporation (NYSE:MPC) will increase its dividend from last year’s comparable payment on the 11th of December to $0.825. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Marathon Petroleum

Marathon Petroleum’s Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, Marathon Petroleum’s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 41.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 19%, which we consider to be quite comfortable, with most of the company’s earnings left over to grow the business in the future.

Marathon Petroleum Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.70 in 2013, and the most recent fiscal year payment was $3.30. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is good to see that there has been strong dividend growth, and that there haven’t been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. Marathon Petroleum has seen EPS rising for the last five years, at 30% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Marathon Petroleum Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We’ve spotted 2 warning signs for Marathon Petroleum (of which 1 makes us a bit uncomfortable!) you should know about. Is Marathon Petroleum not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.