Analyzing ExxonMobil’s stellar shareholder returns
Analyzing ExxonMobil’s financial foundations during these trying times (Part 5 of 10)
ExxonMobil’s cash flow statement
In the earlier parts, we discussed ExxonMobil’s (XOM) cash flows from operating and investing activities. Now, let’s have a look at XOM’s cash flow from financing activities (or CFF) to complete our analysis of the company’s cash flow statement.
CFF is a key intermediary between a company and its sources of capital. It also shows cash returned to shareholders by way of share repurchases and dividends.
Shareholder returns
The major thing to highlight in ExxonMobil’s CFF is the sheer amount of money it has returned to shareholders over the years.
The company paid ~$62 billion in dividends alone over the last seven years. Plus, the company repurchased stock worth ~$160 billion over the same period. That’s another reason for shareholders to love XOM.
In the first three quarters of 2014, ExxonMobil returned ~$18.5 billion to shareholders by way of dividends and buybacks. In comparison, Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP) returned ~$9.1 billion, ~$8.8 billion, and ~$8 billion to shareholders during the same period.
XOM is also the largest holding of the iShares US Energy ETF (IYE), at almost one-quarter of the fund’s value.
Long-term borrowings
We won’t comment much on XOM’s borrowings here. Its borrowings had been quite stable until around 2013, when the company seems to have raised a lot of money via a combination of short-term and long-term borrowings.
What’s more important is whether these levels are straining the company’s finances. We’ll find out in the following parts of this series.
Putting it all together
Bringing all of this together, as we saw in Part 3, we can see that XOM generated ~$331 billion in cash from its operations over the last seven years.
But, as we saw in Part 4, it spent a net amount of ~$162 billion on investments or capital expenditures and a net ~$198 billion on financing activities during the same timeframe.
The “excess” ~$29 billion the company spent over this period is what has brought ExxonMobil’s cash levels from ~$34 billion at the end of 2007 to just under $5 billion at the end of 3Q14.
Unfortunately, this “excessive” rewarding of shareholders may have left XOM in a very vulnerable position at a time when crude oil prices have dropped so low.
The company may have to make some tough decisions regarding its capital expenditures, dividends, and financing activities soon.
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