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Marathon Petroleum Corporation (NYSE:MPC) Passed Our Checks, And It's About To Pay A US$0.75 Dividend

It looks like Marathon Petroleum Corporation (NYSE:MPC) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Marathon Petroleum's shares before the 16th of May to receive the dividend, which will be paid on the 12th of June.

The company's upcoming dividend is US$0.75 a share, following on from the last 12 months, when the company distributed a total of US$3.00 per share to shareholders. Based on the last year's worth of payments, Marathon Petroleum has a trailing yield of 2.7% on the current stock price of $111.72. 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 has a low and conservative payout ratio of just 8.4% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 8.3% of its free cash flow last year.

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It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

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historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Marathon Petroleum's earnings have been skyrocketing, up 42% per annum for the past five years. Marathon Petroleum earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Marathon Petroleum has lifted its dividend by approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Marathon Petroleum an attractive dividend stock, or better left on the shelf? We love that Marathon Petroleum is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

So while Marathon Petroleum looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 2 warning signs with Marathon Petroleum (at least 1 which can't be ignored), and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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