Image source: Marathon Petroleum.
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The energy industry is more complicated than many people understand, with plenty of steps required to get from oil under the ground to gasoline in your vehicle. Marathon Petroleum (NYSE: MPC) plays a vital role in that process, transporting natural gas, refining crude oil into gasoline and diesel, and then selling energy products to consumers through its Speedway line of gas stations and convenience stores. Even though Marathon Petroleum has only been an independent company for five years, it has nevertheless already had occasion to do one stock split, and some investors want to know when the next split could happen. Below, we'll look more closely at the timing of Marathon Petroleum's past stock split to see whether a future split could come soon.
Marathon Petroleum stock splits
Here is the date and split ratio for the one stock split that Marathon Petroleum has done in the past:
Data source: Marathon Petroleum investor relations.
Even though Marathon Petroleum doesn't have a long history, it has still done extremely well for investors. Over the past five years, Marathon Petroleum has produced average annual returns of 23%, easily topping the pace of the broader stock market.
What made Marathon Petroleum split its stock
The decision-making process that Marathon Petroleum apparently used to make its first stock split will look familiar to anyone who has studied the history of stock splits more broadly. After coming public in 2011 at about $40 per share, Marathon climbed to more than $100 per share by early 2015. It was at that point that the refining giant decided to go ahead with a split.
As CEO Gary Heminger explained at the time, "[Marathon Petroleum] has performed very well for its owners since we became an independent company in mid-2011. Our share price has increased substantially since the spinoff, and we believe the stock split will make our shares more affordable for a wider range of investors." The CEO also said that the move reflects confidence in Marathon's future prospects.
The aftermath of the Marathon Petroleum split
The problem for those looking for future stock splits from Marathon Petroleum is that the stock has performed poorly since its split decision. The energy market's huge slump was a prime reason for the tough period for Marathon, and by the early part of 2016, the company had lost more than two-fifths of its value in the stock market. Even with a substantial recovery during the middle of the year, Marathon Petroleum shares are still cheaper now than they were in the summer of 2015 right after the split.
The main problem has been that cheaper oil prices have translated into much lower prices for gasoline and diesel fuel at the wholesale level, and that has hurt refinery stocks across the industry. In addition, utilization rates of refining assets have been relatively high, flooding the market with supplies of refined fuels and putting more pressure on profit margin figures.
Will Marathon Petroleum split again?
None of this means that Marathon Petroleum will never split again. Yet for those seeking immediate gratification, the main problem is that the stock price is nowhere near the $100 per share that would likely lead to another split. Indeed, Marathon needs to make up lost ground before it aims to stake claims to record territory.
Eventually, the energy market should recover, and when that happens, Marathon Petroleum will be in a good position to use its competitive advantages to produce stronger returns than some of its industry peers. That will take time, however, and so investors shouldn't expect to see another stock split from Marathon Petroleum at any time in the near future.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.