Marathon Oil Shares Jump on Downstream Spin-Off

Marathon Oil Corporation (MRO) announced this morning that it plans to spin-off its refining operations into a separate entity called Marathon Petroleum Corporation, sending shares up more than 10% in early trading.

The new company will be traded under the symbol “MPC” and be headquartered in Findlay, Ohio. It will immediately become the fifth-largest oil refiner in the country. The spin-off is expected to be effective June 30, 2011, and shortly thereafter one MPC share will be distributed for every two shares of MRO held.

Shares of MRO jumped as high as $44.90 (+10.78%) in the opening minutes of today’s session, where they hold a 2.23% dividend yield.

The two companies plan to divvy up Marathon’s current $1.00 annual dividend rate, with MRO paying an annual dividend of $0.60 per share and MPC paying $0.80 per share. (So an owner of 100 MRO shares currently expecting $100 of annual income will now receive $60 from his/her 100 shares of MRO, and the other $40 from the 50 shares of MPC received in the spin-off.)

Marathon Oil ranked 21st on my list of The 100 Best Values Among Dividend Stocks entering the year, and currently ranks 23rd on my weekly Dividend Stock Value Rankings.

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