Marathon Petroleum (NYSE:MPC) Will Pay A Larger Dividend Than Last Year At $1.00

Marathon Petroleum Corporation's (NYSE:MPC) periodic dividend will be increasing on the 10th of December to $1.00, with investors receiving 9.9% more than last year's $0.91. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.

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Marathon Petroleum's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Marathon Petroleum's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 117.0%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Marathon Petroleum

Marathon Petroleum Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $1.00 in 2015 to the most recent total annual payment of $3.64. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Marathon Petroleum has seen EPS rising for the last five years, at 41% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Marathon Petroleum could prove to be a strong dividend payer.

We Really Like Marathon Petroleum's Dividend

Overall, a dividend increase is always good, and we think that Marathon Petroleum is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Marathon Petroleum that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.