What led to MRO’s negative EPS despite increased revenues in 9M17?
Marathon Oil’s (MRO) revenues recorded 27.0% growth in 9M17. Every segment of the company drove this growth. MRO’s costs and expenses rose 6.0% due to higher impairment and exploration costs. As a result, the company’s negative income from operations fell 60.0%.
MRO’s interest expenses decreased 4.0% during this period, which translated into much higher negative earnings per share (or EPS) compared to 9M16. The company has been generating negative free cash flow since 2014.
How has the dividend yield evolved over the years?
Marathon Oil (MRO) took a 71.0% dividend cut in 2016 followed by the same dividend per share in 2017. Its stock price has lost 9.0% on a year-to-date (or YTD) basis after gaining 37.0% in 2016. As a result, the dividend yield curve also resembles the other dividend cutters.
Marathon Oil has a dividend yield of 1.3% and a YTD return of -8.8%. This trend compares to the sector’s average dividend yield of 1.6% and a PE ratio of 34.0x.
Comparison with broad indexes
The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 22.7x, and a YTD return of 15.5%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3%, a PE ratio of 21.2x, and a YTD return of 18.7%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.4x and a YTD return of 25.4%.
The PowerShares High Yield Equity Dividend Achievers ETF (PEY) is a dividend ETF with 14.0% exposure to energy. It has a PE ratio of 18.7x and a dividend yield of 2.8%.
The SPDR S&P International Dividend ETF (DWX) is a dividend ETF with 2.0% exposure to energy. It has a PE ratio of 16.0x and a dividend yield of 5.0%.