Exxon Mobil Corporation (NYSE:XOM) Is A Real Dividend Rock Star – Here Is Why
If you are an income investor, then Exxon Mobil Corporation (NYSE:XOM) should be on your radar. Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States, Canada/Other Americas, Europe, Africa, Asia, and Australia/Oceania. Over the past 10 years, the US$344.46b market cap company has been growing its dividend payments, from $1.6 to $3.28. Currently yielding 4.0%, let’s take a closer look at Exxon Mobil’s dividend profile.
See our latest analysis for Exxon Mobil
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
It is paying an annual yield above 75% of dividend payers
It has paid dividend every year without dramatically reducing payout in the past
Its has increased its dividend per share amount over the past
It is able to pay the current rate of dividends from its earnings
It is able to continue to payout at the current rate in the future
High Yield And Dependable
Exxon Mobil’s dividend yield stands at 4.0%, which is high for Oil and Gas stocks. But the real reason Exxon Mobil stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. XOM has increased its DPS from $1.6 to $3.28 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes XOM a true dividend rockstar.
Exxon Mobil has a trailing twelve-month payout ratio of 63.8%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect XOM’s payout to remain around the same level at 60.2% of its earnings, which leads to a dividend yield of 4.1%. Furthermore, EPS should increase to $5.08.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Next Steps:
Investors of Exxon Mobil can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Exxon Mobil is one worth keeping around. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for XOM’s future growth? Take a look at our free research report of analyst consensus for XOM’s outlook.
Valuation: What is XOM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether XOM is currently mispriced by the market.
Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
