Marathon Petroleum: A Strong Hold or Time to Sell?

Marathon Petroleum Corporation (MPC) has been a prominent player in the energy sector, but recent financial results and market trends have investors questioning whether to hold or sell their shares. This article explores the company's performance, dividend growth, and market sentiment to help investors make an informed decision.

Marathon Petroleum's refining and marketing segment has experienced a significant decline in profitability per barrel, with adjusted EBITDA per barrel dropping from $16.06 in Q3 2023 to $3.82 in Q3 2024. This decline was primarily driven by lower market crack spreads, although Marathon's refining margin remained relatively stable at $14.35 per barrel in Q3 2024. The company's crude capacity utilization was approximately 94% in Q3 2024, resulting in total throughput of 3.0 million barrels per day.



Despite the decline in refining profitability, Marathon Petroleum's Midstream segment has shown strong growth, particularly in the Permian and Marcellus basins. In Q3 2024, the Midstream segment reported adjusted EBITDA of $1.6 billion, up nearly 6% year-over-year. This growth is expected to generate $2.5 billion in annual distributions to MPC following MPLX's 12.5% quarterly distribution increase. Marathon Petroleum's commitment to capital return, including a $5 billion share repurchase authorization and a 10% quarterly dividend increase, has also boosted investor sentiment.

Marathon Petroleum's dividend growth rate has been robust, with an average annual increase of 10% over the past five years. This compares favorably to the industry average of 7% and outperforms many of its peers. However, Marathon's payout ratio is relatively conservative at approximately 28.3%, indicating a more cautious approach to capital allocation or a higher reinvestment into the business. The company's dividend yield has been relatively stable, with a 5-year average of 2.8%, although it is lower than the industry average of 3.5%.



Investors should consider Marathon Petroleum's recent performance, dividend growth, and market sentiment when deciding whether to hold or sell their shares. While the company's refining profitability has declined, its Midstream segment growth and commitment to capital return have supported its stock price. Marathon's dividend growth rate and yield, although lower than the industry average, remain attractive to income-oriented investors. Ultimately, the decision to hold or sell Marathon Petroleum shares will depend on each investor's individual risk tolerance and investment goals.

In conclusion, Marathon Petroleum Corporation's recent financial results and market trends have raised questions about the company's future prospects. However, its strong Midstream segment growth and commitment to capital return have supported investor sentiment. Income-oriented investors may find Marathon's dividend growth rate and yield attractive, but those with a higher risk tolerance may prefer to explore other investment opportunities. As always, it is essential for investors to conduct thorough research and consider their individual financial circumstances before making any investment decisions.