Exxon Mobil Corporation’s (NYSE:XOM) dividend will be increasing from last year’s payment of the same period to $0.99 on 10th of December. This takes the annual payment to 3.4% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Exxon Mobil
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Exxon Mobil was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to expand by 20.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $2.52 in 2014 to the most recent total annual payment of $3.96. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. Although we can’t deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Exxon Mobil has impressed us by growing EPS at 17% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We should note that Exxon Mobil has issued stock equal to 11% of shares outstanding. Regularly doing this can be detrimental – it’s hard to grow dividends per share when new shares are regularly being created.
Overall, a dividend increase is always good, and we think that Exxon Mobil is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for Exxon Mobil that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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