Marathon Petroleum: A Top Refining Stock For Dividend Investors

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Marathon Gas Station Fuel Pumps


Investment Rationale

The largest independent refiner successful nan U.S., Marathon Petroleum Corporation (NYSE:MPC), reported beardown operating capacity for Q4 and nan Full Year of 2022. Higher request for proscription fuels owed to nan reopening of China's borders could beryllium a tailwind for Marathon. The institution has a beardown projects pipeline focused connected growth, pinch a equilibrium of accepted and low-carbon projects. The company's attraction connected banal buybacks adds to nan attractiveness of its stock.

Marathon Petroleum Corporation’s banal has rewarded much than 50% returns to investors successful nan past year. Although nan dividend output has fallen owed to a emergence successful banal price, investors tin expect a increasing dividend successful nan coming years, successful summation to superior appreciation.

Robust operating performance

Compared to nan first 3 quarters of 2022, Marathon Petroleum reported higher operating profit and nett income margins successful Q42022. Likewise, its margins for nan afloat twelvemonth 2022 were higher compared to those successful nan past 5 years. Several factors contributed to this outperformance.

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In Q42022, MPC's bottommost statement was positively impacted by a beardown capacity from Refining & Marketing (“R&M”) Segment. The capacity of nan R&M conception was affected astatine nan extremity of nan 4th by nan wintertime large wind Elliott. Despite nan storm, nan refining assets ran astatine 94% utilization, which shows nan resiliency of nan company's operations. The R&M seizure was 109%, which reflects nan percent of nan company's R&M separator parameter realized successful its reported R&M margin. This was chiefly aided by nan company's higher commercialized execution moreover during volatile marketplace conditions, tailwinds for ray merchandise margins, and favorable inventory impacts.


Marathon Petroleum

Marathon Petroleum’s midstream business registered a maturation of 7% connected a YoY basis, which included 10% higher distributions from MPLX. MPLX, a business formed for carrying retired MPC’s midstream operations, is simply a important root of net for nan midstream segment, and its higher free rate travel procreation and distribution will assistance successful further enhancing MPC’s shareholders' wealth.

Higher attraction connected returning capital

For nan afloat twelvemonth 2022, MPC has returned a handsome magnitude of superior to shareholders, 75% of rate from operations, some successful nan shape of dividends and stock repurchases. Out of nan full stock repurchases of $12 cardinal done nan year, $1.8 cardinal were executed successful Q42022 and a further $700 cardinal were executed till nan extremity of January 2023. The institution has a $7.6 cardinal remaining authorization for stock repurchases, which includes a further $5 cardinal approved by nan committee successful Q42022, showing nan company's clear attraction connected higher stock repurchases.

In Q42022, MPC’s nett income and adjusted EBITDA showed a multifold summation pinch nan EPS number jumping from $1.27 per stock to $7.09. In summation to a beardown operational performance, nan affirmative effect of higher stock repurchases besides reflects successful nan jump successful EPS numbers. The institution plans to proceed its attraction connected diverting nan excess superior towards further stock repurchases and little its stock count to further heighten EPS.

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The 4th fourth recorded higher dividend payments which has been changeless astatine $0.58 for nan past 3 years. The dividend per stock roseate to $0.75 - a 30% increase. The full wealthiness returned successful nan shape of dividends successful 2022 was $1.3 cardinal and $351 cardinal successful Q42022. MPC besides bears a substantially higher dividend sum than its adjacent companies Phillips 66 (PSX) and Valero Energy (VLO).

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Attractive capex blend and outlook for 2023

Marathon Petroleum Corporation's superior expenditure shows a patient blend focusing connected maturation arsenic good arsenic maintenance. The section of maturation superior betwixt accepted and low-carbon projects enhances MPC’s opportunity basket. The institution besides holds an optimistic superior outlook for 2023, arsenic seen successful nan beneath figure.

capital outlook

Marathon Petroleum

Two of nan important projects that nan institution is focusing its capex connected are nan Martinez Renewable Fuels Facility and nan STAR task successful its Galveston refinery, located successful Galveston Bay, Texas. Phase 1 of accumulation capacity astatine nan Martinez facility, which will substance MPC's sustainable power goals, is expected to beryllium completed by extremity of Q12023. STAR is an ongoing task which is already successful work and nan institution plans to complete nan remaining activity connected it towards nan extremity of Q12023. The institution expects higher EBITDA contributions from STAR from Q22023.

Healthy Financial Position

Over nan past 3 years, MPC'S debt-to-capital ratio has declined connected a consolidated arsenic good arsenic a standalone basis. The standalone debt-to-capital ratio is opinionated beneath nan company's target debt-to-capital ratio of 25% to 30%. A patient and expanding liking sum ratio indicates comfortable sum for liking payments. The array displaying elder notes maturities besides shows a patient indebtedness maturity floor plan of MPC successful nan coming years.

balance sheet

Marathon Petroleum

At nan extremity of 2022, nan cash, rate equivalents, and short-term investments stood astatine $11,770 million. The rate and rate equivalents number has taken a important leap successful 2022 arsenic compared to nan erstwhile 5 years, indicating a strengthened rate position.

cash flow

Marathon Petroleum

MPC’s profitability ratios explaining return connected equity and return connected invested superior are besides charismatic for nan past 5 years.

MPC stock’s banal capacity and valuation

MPC banal valuation appears to beryllium reasonable among nan stocks of its adjacent companies based connected nan guardant EV to EBITDA ratio.

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The stock’s dividend output has fallen to astir 2% owed to nan important emergence successful its banal price. However, investors tin expect increasing dividends, on pinch superior appreciation based connected nan company’s beardown expected performance.

Seeking Alpha’s proprietary Quant Ratings complaint MPC arsenic a “Strong Buy.” The banal is rated precocious connected profitability, revisions, and momentum factors.

Other Growth Drivers

Higher Demand for Transportation Fuels

Marathon Petroleum Corporation has knowledgeable a betterment successful request for proscription fuels crossed each nan products coming retired of nan pandemic. This betterment is expected to proceed successful 2023. Recently, China, 1 of nan largest lipid consumers globally, has reopened borders for nan first clip successful 3 years. This has boosted nan request outlook for proscription fuels.

MPC’s sturdy financial priorities

MPC useful chiefly pinch 3 robust financial priorities which thief nan institution successful enhancing its financial and operational performance-

  • Sustaining Capital - This includes safe operations of method assets.
  • Dividend - Annual information of dividend coupled pinch stock repurchases.
  • Growth Capital - The institution is focused connected return connected superior on pinch nan competitiveness of its assets.

New multiyear task astatine Los Angeles Refinery

Marathon Petroleum Corporation is successful nan process of executing different task astatine its Los Angeles refinery successful summation to Martinez Conversion. This task is focused connected NOx reductions, successful anticipation of early regulatory requirements astir nan same. MPC focuses connected nan competitory opportunity it has to modernize its inferior systems to meet Phase 1 and Phase 2 of these requirements. The caller task on pinch NOx reductions is besides going to thief trim greenhouse gases, further reducing costs and improving reliability for nan company.

Focus connected capturing Sustainable Aviation Fuel opportunities

One of nan maturation strategies for Marathon Petroleum Corporation is maximizing nan worth of renewable liquid fuels. This besides includes Sustainable Aviation Fuel (“SAF”), a near-term decarbonization tool. The institution is simply a awesome supplier of fossil substance which includes pitchy substance and is perpetually progressive successful R&D regarding nan opportunities to beryllium captured successful SAF and cater to customers' demands going forward.


Marathon Petroleum Corporation's Q4FY22 and full-year 2022 results bespeak a patient operational arsenic good arsenic financial position of nan company. Higher dividends on pinch a attraction connected stock repurchases make nan banal attractive. The institution has beardown capex plans pinch a equilibrium of debased c arsenic good arsenic accepted projects. MPC's equilibrium expanse stands successful a patient position.

Marathon Petroleum Corporation stock’s dividend output has fallen to astir 2% owed to nan important emergence successful its banal price. However, investors tin expect increasing dividends, on pinch superior appreciation based connected Marathon Petroleum Corporation’s beardown expected performance.

This article was written by

RCK Analytics floor plan picture

We supply end-to-end financial investigation services crossed plus classes. We are passionate astir stocks and investments. We return pridefulness successful providing invaluable investing insights successful an easy-to-understand way. .Chandan Khandelwal leads RCK, arsenic its co-founder & CEO. He is simply a Chartered Accountant and Financial Consultant pinch much than 15 years of acquisition successful Finance, Stock Market, Assurance and Business Advisory.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

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