Marathon Petroleum’s dividend yield
Marathon Petroleum (MPC) is fifth on our list of seven downstream dividend-yielding stocks. MPC is an American downstream company with refining, midstream, and marketing business segments. Its market cap (capitalization) of $35 billion ranks third among our seven companies in this series.
MPC has a current dividend yield of 2.5%. In 1Q18, it made a dividend payment of $0.46 per share, announced on January 29, 2018, and paid on March 12, 2018. MPC has consistently paid dividends in the past three years despite refining margin volatility. It made a dividend payment of $0.50 per share on March 10, 2015, before the stock split in May 2015.
Marathon Petroleum trades at a forward PE (price-to-earnings) ratio of 13.7x compared to 10.3x in 1Q15. Valero Energy (VLO) and Phillips 66 (PSX) also saw their valuations rise in the past three years. Andeavor’s (ANDV) valuations declined in the same period.
MPC’s current forward PE ratio is above the average forward PE ratio of 12.8x for our seven refining stocks. That could be due to MPC’s growth activities. The company plans to expand across its segments. It estimates that it will spend $4 billion in 2018. It plans to spend 60% of its estimated capex (capital expenditure) in its midstream segment, 24% in refining, and 13% in the Speedway segment in 2018.
In its refining segment, MPC plans to focus on greater production of higher-value products and Tier 3 gasoline-compliant sustenance spending. About $950 million is expected to be spent in the refining segment in 2018. In its Speedway segment, MPC plans to spend $530 million to open stores at new locations and remodel existing locations.
MPC also aims to strengthen its midstream segment, which is evident from the fact that it is expected to incur the highest capex (around 60% of total capex) in this segment. MPC’s strategic plan, unveiled in January 2017, has now completed the dropdown of assets representing $1.4 billion of EBITDA (earnings before interest, tax, depreciation, and amortization) to date to its MLP, MPLX (MPLX), which has strengthened the company’s midstream segment.