NEW YORK (TheStreet) -- Marathon Petroleum (MPC - Get Report) impressed investors with second-quarter earnings showing a much higher-than-expected diluted earnings per share of $2.95.

This was 80 cents higher than analysts' expectations. Its shares, trading around $87, are down 5.4% for the year to date but up nearly 21% for the past 52 weeks.

Here's why the stock is a buy. During the past quarter Marathon Petroleum managed to increase its revenue despite a 6.1% drop in its refinery throughputs. Most of its gain in revenue came from favorable realized oil prices and better margins on oil prices in the Gulf Coast. The narrower margin between Brent and WTI were offset in the past quarter.

The favorable margins also reflected in a higher profit margin in the past quarter --5.1% compared to 3.7% in the second quarter last year.

Due to higher profit margins, the company was able to increase its dividend by 19% to 50 cents a share. In annual terms, this comes to 2.35% yield. But this isn't the only way Marathon Petroleum pays back its investors. It has recently approved another $2 billion share repurchase program over the next two years. Marathon Petroleum already purchased $3.1 billion worth of shares in the past year. If the company buys back another $3 billion shares in the next 12 months, its buyback yield will come to 12.2%. So the annual augmented dividend -- the sum of the dividend yield and buyback yield -- will reach 14.5% a year.

There are risks of investing in Marathon Petroleum mainly related to the fluctuations in the oil spreads. Since the company's operating profit isn't high (its operating cash to revenue ratio is close to 3%), any sudden drop in oil margins could substantially cut down its operating cash flow. But since the company has more than $2 billion in cash and a very low debt burden (its debt to equity ratio is only 0.34), a cash flow problem isn't likely to occur.

Thus, as an investment Marathon Petroleum offers an interesting opportunity mainly due to its slowly growing revenue and very high yield it pays to its investors from dividend and shares repurchase program.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates MARATHON PETROLEUM CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate MARATHON PETROLEUM CORP (MPC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MPC's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 4.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 44.2% when compared to the same quarter one year prior, rising from $593.00 million to $855.00 million.