This is another solid way for more conservative investors to play the energy sector. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.
Until just recently, the company operated approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.
Last August, the company announced it would sell Speedway to 7-11 in an all-cash deal valued at $21 billion, or $16.5 billion after-tax. The sale transforms the company’s balance sheet and creates options to revisit the corporate structure of MPLX. Many on Wall Street feel that with Speedway removed, the dislocation in refining value becomes even more transparent as the company trades much cheaper than its industry peers do. The deal is expected to close this quarter.
Marathon Petroleum stock investors receive a 5.28% dividend. BofA Securities has set a $66 price target. The consensus target is much lower at $51.93, and shares closed at $43.94 on Wednesday.
This Wall Street favorite is a very solid energy play for more conservative investors. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.
Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.
Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.
Shareholders receive a 6.67% dividend. The BofA Securities analysts are very bullish and have their price target at $74. The consensus target is $66.88, and Valero Energy stock closed last at $58.73 per share.
While there is always an outside chance any of these companies could cut their dividends, it seems unlikely now that the worst for the sector and benchmark oil pricing seemingly passed some time ago. We stick with four integrated giants and a large-cap refiner as they all have the ability to fight through cyclical drops in the sector and oil pricing, have multiple income streams and have already done a large amount of fiscal belt-tightening in the past year.