Stock Analysis

Don't Buy Marathon Petroleum Corporation (NYSE:MPC) For Its Next Dividend Without Doing These Checks

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NYSE:MPC
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Readers hoping to buy Marathon Petroleum Corporation (NYSE:MPC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 16th of February, you won't be eligible to receive this dividend, when it is paid on the 10th of March.

Marathon Petroleum's next dividend payment will be US$0.58 per share. Last year, in total, the company distributed US$2.32 to shareholders. Last year's total dividend payments show that Marathon Petroleum has a trailing yield of 4.7% on the current share price of $49.81. If you buy this business for its dividend, you should have an idea of whether Marathon Petroleum's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Marathon Petroleum

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Marathon Petroleum reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Marathon Petroleum paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:MPC Historic Dividend February 11th 2021

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Marathon Petroleum reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Marathon Petroleum has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Get our latest analysis on Marathon Petroleum's balance sheet health here.

The Bottom Line

Is Marathon Petroleum worth buying for its dividend? This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Marathon Petroleum despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 3 warning signs for Marathon Petroleum (2 shouldn't be ignored) you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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What are the risks and opportunities for Marathon Petroleum?

Marathon Petroleum Corporation, together with its subsidiaries, operates as an integrated downstream energy company primarily in the United States.

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Rewards

  • Price-To-Earnings ratio (5.2x) is below the US market (15.1x)

  • Earnings grew by 2418.3% over the past year

Risks

  • Earnings are forecast to decline by an average of 34.1% per year for the next 3 years

  • Has a high level of debt

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Marathon Petroleum

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