ExxonMobil: It's All About Protecting The Dividend And The 6% Yield Now

In late 2020, the company announced that it wouldn't be increasing its quarterly dividend, something it hasn't done in nearly two decades.
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Exxon Mobil (XOM) explores for and produces crude oil and natural gas in the United States and internationally, operating in the upstream, downstream and chemical segments. The company is also involved in the manufacture, trade, transport, and sale of crude oil, natural gas and other petroleum products.

XOM, like many other companies in the energy space, has suffered for years in a turbulent economic environment that has offered oil and gas stocks little, if any, participation in the bull market since the bottom of the financial crisis. ExxonMobil stock has been dead money for the past decade while the S&P 500 has gained more than 280%.

The sector plunged further during the COVID bear market of 2020, but has been one of the fastest to rebound thanks to expectations for a pickup in global energy demand later this year. The broader energy sector, as measured by the Energy Select Sector SPDR ETF (XLE), has beaten the S&P 500 since the March low having gained 133% versus the 91% return of the large-cap index. ExxonMobil has also beaten the S&P 500 over that time, but has gained a more modest 105%.

XOM has long been a favorite among dividend seekers thanks to its current 6% yield, but there are substantial questions surrounding the sustainability of that yield. In late 2020, the company announced that it wouldn't be increasing its quarterly dividend, something it hasn't done in nearly two decades. That's a better outcome than the dividend cut that many analysts believed was a real possibility, but high debt loads, struggling profit margins and low oil prices (up until recent months at least) have been putting significant pressure on the company's financial health.

The outlook appears to be more optimistic today as we emerge from the COVID pandemic and ExxonMobil will operate in a more profit-friendly environment and make significant investments in high opportunity projects. At a recent company investor day, management reiterated its commitment to paying and increasing its dividend moving forward, so the recent freeze may just be a temporary one-off event.

This report for ExxonMobil is through May 2021.

Report Highlights

You can find the full report on ExxonMobil below, but here are a few of the highlights.

  • Exxon Mobil has vowed to safeguard its dividend after posting its first annual loss, while Chevron and Exxon Mobil executives have talked about a possible merger.

  • Today the volume, RSI and, MACD are showing a possible downtrend continuation. The price could drop 8% to $54.16 and then go up to test the 25-week high level.

  • The company's recent reorganizations along value chains enabled it to reduce operating costs and improve efficiencies to better position itself for the future.

  • ExxonMobil's forward plans are expected to reduce absolute upstream greenhouse gas emissions by an estimated 30 percent by 2025 compared to 2016.

  • Exxon Mobil scores poorly on profitability, but its overall financial health is still fine.

  • While debt is still a problem for the company, its current debt-to-equity ratio doesn't appear to be hugely out of line with the industry.

  • ExxonMobil has a dividend yield of 5.9% and has raised its dividend for 18 consecutive years, although that streak is at risk of ending.

ExxonMobil Report

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