Editors' pick: Originally published Feb. 11.
Marathon Petroleum (MPC) stock will trade ex-dividend Friday, Feb. 12. To qualify for a dividend check, investors must own shares of the energy company before its ex-dividend date -- the last day management will finalizes its roster of the shareholders to whom it will send dividend payments. Beyond Marathon's dividend, there's little to be excited about.
Thanks to the uncertainty still surrounding oil prices, which remain at a decade low, the Ohio-based company has missed Wall Street earnings estimates in three straight quarters. This is despite Marathon having some advantages as a refiner, where it can make money even amid lower prices of oil. Accordingly, the company's stock -- as with the most of energy sector -- has gotten crushed, falling almost 40% year to date, against an 8% decline in the S&P 500 (SPX) index and a 9% decline in the Energy Select Sector SPDR Fund (XLE) .
With its shares now trading at three-year lows, investors want to know if it's time to buy ahead of its ex-dividend date. This is where investors or traders buy shares of companies before their ex-dividend date for the sole purpose of collecting the quarterly dividend and then immediately selling the stock within days after the dividend cash payment has been paid the company.
With the company's stock currently trading at around $31, Marathon's dividend yields 3.18% annually, or some 1.18 percentage points higher than the 2.00% yield paid out by the average stock in the S&P 500 (SPX) index. Marathon will pay its 32-cent quarterly payout on Thursday, March 10, to shareholders of record on Feb. 17. Given Marathon's growth struggles, buying only for the dividend is recommended.
In this case, investors can buy the stock now at its 52-week low, then get out on Feb. 18. From a technical perspective, unless Marathon can hold the $32 level, the next support area won't be seem until around $20 per share, which is some 37% lower. While the company has shown growth in its retail and pipeline business, these haven't been enough to offset weaker global demand for distillate -- what it uses to produce diesel fuel and regular gasoline.
It's true, there were some signs of progress in its fourth quarter earnings, including higher cash flows and expanding profit margins in its refining business. But with oil prices projected to remain weak for the foreseeable future, why risk further losses in the share price? The best play here is to buy the dividend, then immediately get out.