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Jun
11
Jonathan Yates
Is Marathon Petroleum a Safe Harbor in a Turbulent Market?
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Even though the world’s stock markets are down for the last six weeks of market action, oil is still trading in the mid-90s.  That has kept the share price of petroleum companies in the sector up, too.  A downstream pick in the sector to consider is Marathon Petroleum (NYSE: MPC), which was spun off from Marathon Oil (NYSE: MRO) last year.

Marathon Petroleum refines, transports, markets petroleum products.  While the stock market has been strong, with the Dow Jones Industrial Average up about 22% since November, the oil sector has been especially robust.  United States Oil (NYSE: USO), the exchange traded fund for oil, is up 2.53% for the week.  It has jumped almost 7.50% for the last six months.

As the chart below shows, Marathon Petroleum has turned in an even stronger performance.  It has more than doubled for the last year, soaring by over 130%.  For 2013, Marathon Petroleum Corporation is up 31.96%.  The last month of trading has witnessed another 6% price.

 

 

All well and good, but investors buy for the future returns.

Now trading around $80 a share, the mean analyst target price for Marathon Petroleum over the next year is $94.95, almost 20% higher.  There is a dividend yield of 1.70%.  Low, yes, but so is the dividend payout ratio at just 12.41%.  That means there is plenty of cash to raise the dividend or initiate a stock buyback program to reward the shareholders.

Of those owning the stock of Marathon Petroleum, almost 85% are institutional investors such as mutual funds and pension groups.  As a result of this high level of institutional ownership, the short float is very low at just 1.78%.  Few are willing to bet that Marathon Petroleum will tumble despite its strong stock performance over the last year.

 

 

 



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