Does a Hike Make Murphy USA (MUSA) a Good Dividend Stock?
Murphy USA MUSA recently got approval from its board of directors to increase the quarterly dividend by a penny (or 2.3%) to 45 cents per share, which translates into $1.80 per share on an annualized basis. The new payout will be made on Sep 5 to its common shareholders of record on Aug 26.
MUSA continues to display strength across all major categories, thanks to strong retail fuel margin contribution and robust tobacco sales, to go with an aggressive store expansion strategy and a resilient asset base. This positive backdrop, together with Murphy USA’s low-cost model, balanced capital allocation and healthy cash flows, allowed the Zacks Rank #3 (Hold) refining and marketing operator to reward investors with a dividend hike last week.
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While stock buyback continues to be MUSA’s preferred tool to distribute cash, the company’s policy dictates that it plows back a small portion of its capital in paying dividends. Agreed, the company’s current dividend yield is very low at less than 1%, but it is well protected with a payout ratio of just 7. As a result, the dividend not only looks quite sustainable but also leaves enough scope for future dividend increases. Investors should note that Murphy USA was one of the very few enterprises to actually initiate their first dividends during the coronavirus crisis of 2020 when countless others were being cut.
Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States. The El Dorado, AR-based company, in its current form, came into existence following the 2013 spin-off of Murphy Oil Corporation’s downstream business into a separate, independent and publicly traded entity. Murphy USA markets refined products through a chain of retail stations, almost all of which are located near a Walmart superstore, primarily in the Southeast, Southwest and Midwest United States.
3 Energy Dividend Payers That Offer Better Yields Than MUSA
If you think Murphy USA’s dividend yield is too modest, here are some stocks that could be better choices.
HF Sinclair Corporation DINO: A producer and marketer of gasoline, diesel fuel and other specialty products, HF Sinclair pays out a quarterly dividend of 50 cents ($2 annualized) per share that gives it a 4.23% yield at the current stock price. The company’s payout ratio is 31, with a five-year dividend growth rate of 8.45%.
ExxonMobil XOM: ExxonMobil is one of the largest publicly traded oil and gas companies in the world, which participates in every aspect related to energy — from oil production to refining and marketing. XOM’s dividend of 95 cents per share ($3.80 annualized) represents a 3.32% yield. ExxonMobil’s payout ratio is 42, with a five-year dividend growth rate of 1.94%.
Valero Energy VLO: Among all the independent refiners, Valero offers the most diversified refinery base with a capacity of 3.2 million barrels per day in its 15 refineries located throughout the United States, Canada, the United Kingdom, Ireland and Latin America. VLO pays out a quarterly dividend of $1.07 ($4.28 annualized) per share, which gives it a 3.03% yield at the current stock price. The company’s payout ratio is 24, with a five-year dividend growth rate of 2.48%.
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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Valero Energy Corporation (VLO) : Free Stock Analysis Report
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
HF Sinclair Corporation (DINO) : Free Stock Analysis Report