Wednesday, September 14, 2011

Marathon Oil MRO (Dividend Growth Portfolio)

Marathon Oil (MRO) is an oil exploration company, having recently spun off its refining operations. As a newly unintegrated entity, past earnings and dividend growth stats are irrelevant and is its historical return on equity. However, future profit and dividend increases are expected in the 8-13% range and ROE is estimated in the 12-15% area. Looking ahead both earnings and dividends will be driven by:

(1) growth via acquisition of properties in Texas’ Eagle Ford shale,

(2) increase in net proved reserves from globally diversified operations,

(3) rising oil production from projects in the Gulf of Mexico, Norway and the Canadian oil sands.


(1) potential fluctuations in oil and gas prices,

(2) political risks associated with doing business in foreign countries,

(3) the adverse impact of suspended operations in Libya.

MRO is rated A+ by Value Line, has a 24% debt to equity ratio and its stock yields 1.8%.


Note: MRO stock made good progress off its March 2009 low, surpassing the down trend off its June 2007 high (straight red line) and the November 2008 trading high (green line). Long term, MRO is in a trading range (blue lines). However, intermediate term it is an up trend (purple lines) as it is short term (brown is the lower boundary). The wiggly red line is the 30 day moving average. The Dividend Growth Portfolio owns a 50% position in MRO by virtue of the company having split into two entities (E&P and refining) that was followed by the sale of the new refining shares. Shares would be Added at $12; the lower boundary of its Sell Half Range is $35.