2 Top Refinery Stocks Beat the S&P 500 Over the Past 10 Years and Pay Reliable Dividends

By Lee Jackson Published Jun 15, 4:15PM EDT

Quick Read

While oil has declined to the lowest levels since 2021, the refiners continue to act well.
The summer driving season is on, which will help gasoline demand.
Institutional energy buyers are bullish on the top refiners.

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2 Top Refinery Stocks Beat the S&P 500 Over the Past 10 Years and Pay Reliable Dividends — © zorazhuang / E+ via Getty Images

Dividend stocks are a favorite among investors for good reason. They provide a steady stream of passive income and offer a promising avenue for total return. Total return, a comprehensive measure of investment performance, encompasses interest, capital gains, dividends, and distributions realized over time. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend. One energy sub-sector that has surprisingly provided investors with massive total return numbers over the past decade is the refiners.

Top energy companies have consistently been a reliable path to total return over the years, but investors often overlook the refining sector. It is essential to remember that every time you fill up your car, truck, or SUV with gasoline, it’s because a refinery somewhere is constantly producing the product. One data point that most investors are unaware of is that two of the largest U.S. refiners over the past decade (through late 2024) have outperformed the S&P 500 in total return by a substantial margin, even though the S&P 500 achieved a solid 14% total return.

We decided to screen the two companies that outperformed the S&P 500 total return figures, all of which provide dependable dividends and offer decent entry points. Additionally, both are rated Buy by top Wall Street firms we cover.

Why do we cover energy dividend stocks?

Energy dividend stocks offer investors a reliable source of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort. That makes it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

Marathon Petroleum

With a 10-year average total return of 18.5%, this top refiner remains a bargain-priced investment. Marathon Petroleum Corp. (NYSE: MPC | MPC Price Prediction) is an integrated, downstream energy company.

The company’s segments include:

Refining & Marketing
Midstream
Renewable Diesel

The Refining & Marketing segment refines crude oil and other feedstocks at its refineries in the Gulf Coast, Mid-Continent, and West Coast regions of the United States. It sells refined products to wholesale marketing customers domestically and internationally. It also sells to buyers on the spot market and to independent entrepreneurs who operate primarily Marathon-branded outlets.

The Midstream segment gathers, transports, stores, and distributes crude oil, refined products, including renewable diesel, and other hydrocarbon-based products, primarily for the Refining & Marketing segment via refining logistics assets, pipelines, terminals, and other means.

The Renewable Diesel segment processes renewable feedstocks into renewable diesel, markets this product, and distributes renewable products through its Midstream segment and third-party channels.

Wells Fargo has an Overweight rating with a target price of $185.

Valero

Based in Texas, this company delivered a strong 16% total return to investors over the decade and offers a solid dividend. Valero Energy Corp. (NYSE: VLO) is a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels, as well as petrochemical products.

The company sells its products primarily in the United States, Canada, the United Kingdom, Ireland, and Latin America.

Valero operates through three segments:

Refining
Renewable Diesel
Ethanol

The Refining segment encompasses the operations of its petroleum refineries, the associated activities involved in marketing its refined petroleum products, and the logistics assets that support these operations.

The Renewable Diesel segment encompasses the operations of Diamond Green Diesel and its associated activities, including marketing renewable diesel and renewable naphtha.

The Ethanol segment includes the operations of its ethanol plants and the related activities involved in marketing its ethanol and co-products. The company owns over 15 petroleum refineries located in the United States, Canada, and the United Kingdom.

Goldman Sachs has a Buy rating with a $154 target price.

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About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.