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Analyzing Marathon Oil’s Dividend Announcement

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Dividend

On January 25, 2017, Marathon Oil (MRO) declared a dividend of $0.05 per share for 1Q17. The dividend will be payable on March 10, 2017, to stockholders of record at the close of business on February 15, 2017.

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Recent dividend and dividend yield

MRO paid its last dividend on December 12, 2016. It paid a dividend of $0.05 per share on its common stock for 4Q16. For the trailing 12 months, Marathon Oil has paid a total dividend of $0.20 per share on its common stock.

On February 17, 2017, the company’s dividend yield, which measures its trailing-12-month dividend divided by its stock price, stood at ~1.2%.

Dividend history

From 3Q14 to 3Q15, Marathon Oil paid a dividend of $0.21 per share on its common stock. As seen in the chart above, Marathon Oil’s dividend yield rose from 3Q14 to 3Q15, mainly because of the steep fall in its stock price. MRO’s stock price was in a downtrend due to falling crude oil (USO) prices. When a stock’s price falls, its dividend yield rises.

In October 2015, Marathon Oil announced the reduction of its quarterly dividend on its common stock from $0.21 per share to $0.05 per share. MRO’s decision to reduce its dividend was consistent with its broader initiative to cut costs. The company’s adjustment to its dividend increased its annual free cash flow by more than $425 million. We’ll study MRO’s cash flow in the next article.

Other upstream players

Due to a steep downtrend in energy prices, many upstream companies cut back on their dividends. In 2016, Energen (EGN) and Denbury Resources (DNR) announced that they’d discontinued cash dividends on their common stock in response to a significant fall in energy prices.

Next, let’s study MRO’s cash flows.

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