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Exxon Mobil: Big Oil Stock Still Paying High Dividend

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By    |   Wednesday, 13 March 2019 02:16 PM

Investors hoping to generate higher income from their investment portfolios should consider the Dividend Aristocrats, a group of 57 stocks in the S&P 500 Index that have raised their dividends for at least 25 years in a row.

There are only two energy stocks on the list of Dividend Aristocrats. Oil and gas major Exxon Mobil (XOM) is a Dividend Aristocrat, with over 30 years of annual dividend increases.

Exxon Mobil has a long history of dividend increases each year, as well as a high dividend yield of 4%. As a result, it is among the top dividend-paying stocks in the oil industry.

Best-In-Class Sector Leader

Exxon is the largest publicly-traded energy company in the world, with a market capitalization of $352 billion. It is an integrated oil and gas giant, with a huge exploration and production business, along with large refining and chemicals businesses.

Exxon produced nearly 4 million barrels of oil and gas per day last year. The company currently generates $290 billion in annual revenue, along with over $21 billion of net profits last year. In 2018, the oil major generated 60% of its earnings from its upstream segment, 26% from its downstream (mostly refining) segment and the remaining 14% from its chemicals segment.

Exxon performed well in 2018, thanks in large part to recovering oil prices. In the 2018 fourth quarter, Exxon reported $71.9 billion in revenue, up 8.1% year-over-year. On an adjusted basis, Exxon earned $6.41 billion in the fourth quarter versus $3.73 billion in the same quarter last year. For the year, the company recorded revenue of $290.2 billion, up 19% increase compared to 2017. On an adjusted basis full year earnings totaled $21 billion compared to $15.3 billion in 2017. Earnings-per-share came in at $4.88 for the year.

Strong Balance Sheet Fuels Dividend Growth

Not only is Exxon the largest publicly-traded oil and gas company, it is also in the best financial condition. It has a credit rating of AA+ from Standard & Poor’s and Aaa from Moody’s, the two major credit ratings agencies. Exxon’s credit ratings are higher than those of its closest industry peers. This means Exxon enjoys more favorable terms when it raises capital to fund new projects.

A strong balance sheet also leaves more cash flow left over for dividend increases. Exxon raised its dividend by 6.5% in 2018, with another raise highly likely next year and beyond. The company has a modest payout ratio which leaves room for future dividend growth.

Exxon should be a particularly strong performer in the oil industry during a recession, as the company has the financial flexibility to cut costs during economic downturns. Exxon remained highly profitable during both the Great Recession of 2007-2009, as well as the steep drop in oil prices during 2014-2016. The company continued to raise its dividend throughout both periods, which were highly difficult for the broader energy industry.

Annual dividend increases and a high yield of 4% make Exxon Mobil a standout stock for income investors looking to add an oil stock to their portfolios.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.
 

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BenReynolds
Annual dividend increases and a high yield of 4% make Exxon Mobil a standout stock for income investors looking to add an oil stock to their portfolios.
exxon, mobil, oil, dividend
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2019-16-13
Wednesday, 13 March 2019 02:16 PM
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