The process of screening for high-quality dividend stocks often requires balancing yield with sustainability. A straightforward approach is to look for companies that score well on a dedicated dividend rating, while still maintaining decent levels of profitability and financial health. This helps avoid the common pitfall of chasing a high yield that may be at risk due to underlying business issues.
Running a screen that filters for a high ChartMill Dividend Rating (7 or higher), a minimum Health Rating of 5, and a minimum Profitability Rating of 5 brings up a list of candidates that meet these balanced criteria. One notable name that appears from this screen is Marathon Petroleum Corp (NYSE:MPC). Let’s take a closer look at why it stands out for income-focused investors.
Dividend Attributes
The core reason MPC made the cut is its strong ChartMill Dividend Rating of 7 out of 10. This rating is built on several favorable factors for dividend investors.
- Sustainable Payout: The payout ratio is a key metric for assessing dividend safety. MPC pays out only 24.85% of its earnings as dividends. This is a very comfortable level, leaving plenty of room for the company to reinvest in its business or weather a downturn without being forced to cut its dividend.
- Reliable Growth: The dividend has grown at an average rate of 9.94% per year. More importantly, the company has not decreased its dividend for at least the last 10 years, demonstrating a strong commitment to returning capital to shareholders.
- Earnings Support: The report notes that MPC’s earnings are growing faster than its dividend. This is a strong sign that the dividend growth is sustainable and not just a temporary cash distribution. The current yield stands at 1.65%.
The combination of a low payout ratio and consistent growth makes MPC a good example of a stock that scores highly on the dividend sustainability criteria emphasized in the screening strategy.
Health and Profitability Snapshot
While the dividend is the main focus, the screen also requires a baseline for health and profitability to ensure the company is fundamentally sound.
- Profitability: MPC scores a 5/10 on the Profitability Rating. This is driven by strong returns, including a Return on Equity (ROE) of 27.62% and a Return on Invested Capital (ROIC) of 11.70%, both ranking well above the industry average. This indicates that management is effectively generating profits from the capital at its disposal.
- Financial Health: The Health Rating of 5/10 is decent but not flawless. The company has a Altman-Z score of 3.19, which suggests a low risk of bankruptcy and is better than 80% of its peers. However, it carries a significant amount of debt, with a Debt/Equity ratio of 1.83. This is a key area to monitor, though the strong cash flow generation (as seen in the payout ratio) helps manage that burden.
Given the screen’s goal of finding solid dividend payers without taking on excessive risk, MPC’s moderate health and profitability scores are acceptable. The underlying profitability metrics confirm the company’s ability to generate the earnings needed to support and grow its distribution.
Valuation and Growth Context
For a company that scores well in these areas, the valuation is also reasonable. While the trailing P/E ratio of 19.43 is slightly above the industry average, the forward P/E drops to a very reasonable 10.24 due to expected earnings growth. The PEG ratio is also low, indicating that the current price is not overstretched relative to future earnings growth.
Earnings per share are expected to grow at a strong 22.52% annually over the coming years. When earnings grow faster than the dividend (which is growing at ~10%), the payout ratio stays low, and the dividend becomes even more sustainable over time. This aligns perfectly with the sustainability checks performed in the initial screening.
This combination of a healthy dividend profile, reasonable valuation, and expected earnings growth makes MPC a candidate worth a closer look for a dividend-focused portfolio.
Analyst Views
While analyst sentiment is not a direct filter in this screen, the underlying data from the fundamental report suggests a supportive backdrop. The strong forward earnings growth projections and the company’s ability to generate cash flow provide a fundamental floor for the dividend strategy.
Find More Candidates
This deep look into Marathon Petroleum shows how a simple, balanced screen can reveal stocks with a strong dividend profile backed by solid fundamentals. The Best Dividend Stocks screen is a great starting point for investors looking to replicate this process and generate their own list of high-quality dividend ideas. You can run the screen yourself and adjust the filters to match your own risk tolerance and yield requirements.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.
Read full article here »
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Marathon Petroleum Corp (NYSE:MPC) Tops Balanced Dividend Screen with Strong Payout Ratio and Consistent Growth
The process of screening for high-quality dividend stocks often requires balancing yield with sustainability. A straightforward approach is to look for companies that score well on a dedicated dividend rating, while still maintaining decent levels of profitability and financial health. This helps avoid the common pitfall of chasing a high yield that may be at risk due to underlying business issues.
Running a screen that filters for a high ChartMill Dividend Rating (7 or higher), a minimum Health Rating of 5, and a minimum Profitability Rating of 5 brings up a list of candidates that meet these balanced criteria. One notable name that appears from this screen is Marathon Petroleum Corp (NYSE:MPC). Let’s take a closer look at why it stands out for income-focused investors.
Dividend Attributes
The core reason MPC made the cut is its strong ChartMill Dividend Rating of 7 out of 10. This rating is built on several favorable factors for dividend investors.
The combination of a low payout ratio and consistent growth makes MPC a good example of a stock that scores highly on the dividend sustainability criteria emphasized in the screening strategy.
Health and Profitability Snapshot
While the dividend is the main focus, the screen also requires a baseline for health and profitability to ensure the company is fundamentally sound.
Given the screen’s goal of finding solid dividend payers without taking on excessive risk, MPC’s moderate health and profitability scores are acceptable. The underlying profitability metrics confirm the company’s ability to generate the earnings needed to support and grow its distribution.
Valuation and Growth Context
For a company that scores well in these areas, the valuation is also reasonable. While the trailing P/E ratio of 19.43 is slightly above the industry average, the forward P/E drops to a very reasonable 10.24 due to expected earnings growth. The PEG ratio is also low, indicating that the current price is not overstretched relative to future earnings growth.
Earnings per share are expected to grow at a strong 22.52% annually over the coming years. When earnings grow faster than the dividend (which is growing at ~10%), the payout ratio stays low, and the dividend becomes even more sustainable over time. This aligns perfectly with the sustainability checks performed in the initial screening.
This combination of a healthy dividend profile, reasonable valuation, and expected earnings growth makes MPC a candidate worth a closer look for a dividend-focused portfolio.
Analyst Views
While analyst sentiment is not a direct filter in this screen, the underlying data from the fundamental report suggests a supportive backdrop. The strong forward earnings growth projections and the company’s ability to generate cash flow provide a fundamental floor for the dividend strategy.
Find More Candidates
This deep look into Marathon Petroleum shows how a simple, balanced screen can reveal stocks with a strong dividend profile backed by solid fundamentals. The Best Dividend Stocks screen is a great starting point for investors looking to replicate this process and generate their own list of high-quality dividend ideas. You can run the screen yourself and adjust the filters to match your own risk tolerance and yield requirements.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.
Read full article here »