Exxon Mobil is one of the largest energy firms in the world. It explores for and produces crude oil and natural gas in the United States, Europe, Latin America, Asia, and Australia. The company operates through three unique segments, including upstream, downstream, and chemicals. The company was started in 1870 and is located in Irving, Texas.
Exxon Mobil has maintained a three-year growth rate of dividends of 4.4 percent. Exxon Mobil currently ranks 7th in dividend yield within the large cap basic materials, major integrated oil & gas category. The quarterly dividend for the June payment will be $0.77 versus the prior year rate of $0.75 per share. Exxon Mobil is a member of our Top 100 Dividend Stocks. (see below).
The dividend will be paid at the new higher rate on June 9, 2017, to shareholders of record at close of business on May 12, 2017. Exxon Mobil Corp. is currently priced at $82.02. Listed in the table below are the quarterly dividend payments since 2010.
Analysis of Exxon Mobil is based upon our five key criteria for the Top 100 list, which include;
|Dividend Growth (3-7 year avg)||6.5||387|
|S&P Financial Rating||A+||208|
|% Yield||3 Year Div. Growth Rate||7 Year Div. Growth Rate||SPS 2017||P/S Ratio||10 yr P/S Low||10 yr P/S High||5 yr low Yield %||5 yr max Yield %|
- Exxon Mobil maintains an investment grade rating of A+.
- Exxon Mobil’s current dividend yield (3.76%) is above its five-year average historical dividend yield.
- Exxon Mobil maintains a beta of 0.95, lower than the average company.
- Exxon Mobil’s dividend yield is above that of the S&P 500 Index.
- Exxon Mobil has paid out a dividend consecutively for the past 24 years.
- Exxon Mobil is trading well below its ten-year average price/sales (P/S) ratio.
Latest Earnings & Overall Analysis:
Exxon Mobil issued its earnings data on April 28th. The company reported $0.95 EPS for the quarter, topping the consensus estimate by 10 cents. The large energy giant delivered $63.3 billion in revenues for the quarter, just below the $64.7 billion expected. The firm’s cash flow from operations was $8.2 billion, This was nearly double last year’s results and well above analyst expectations. The firm’s cash flow was helped by substantially reduced capital and exploration spending as well as an asset sale for $700 million, Spending dropped by over $4 billion. This was a twenty percent drop from last year’s numbers. Earnings leapt to $4 billion from $1.8 billion last year.
The firm’s upstream, or exploration, operations had solid results. The firm generated $2.3 billion in profit while its downstream operations produced over $1 billion in revenue. International upstream earnings were very strong. The latter was a slight increase from 2016 results. Chemical operations were weaker than expected, as profits within the division dropped to $1.2 billion from last year, but were still positive. Currency effects had a negative impact across the board for the firm.
One of the big moves for Exxon this year is its move to increase holdings in the Permian region. The firm purchased a large swath of land from the Bass family in January for a record $5.6 billion. This should alleviate production growth concerns. For the most part, Exxon has completed most of its largest capital projects. With the addition of the Permian assets along with positioning in the Bakken area, nearly one-third of future production will come from these areas. These are considered more flexible assets as spending goes in line with production. It also is lower cost production as well, as the price to pull oil from the ground from shale plays has come down remarkably in the past three years.
With major projects completed and paid for and the move into flexible production, Exxon should be able to deliver oil at a price closer to $45 per barrel, or lower. This will allow the firm to live with lower prices and still remain cash flow positive and pay its largess dividend. Although production growth will no doubt slow over the ensuing five years overall, its mix will be better with the new Permian assets. Total production dropped 4 percent to just over 4 million barrels of oil equivalent per day. for Q1. But this should be adjusted for asset disposal and downtime, which makes the production growth loss closer to 2 percent.
The firm ended Q1 with nearly $5 billion in cash. It recent 3 percent dividend increase demonstrates that large hikes in the foreseeable future will be modest. However, considering how many other energy firms cut their dividends, an actual raise demonstrates the financial stability of Exxon. Exxon also does have some positive exploration prospects outside the Permian as well. The firm also acquired an interest in a large natural gas field in Mozambique to diversify operations both away from oil and location wise. Its focus in Africa is for a new onshore LNG facility. Its Guyana field also offers promise. Although these fields will not move the needle much for Exxon, it provides alternative production growth potential.
|Earnings per Share||1.88||3.85||7.6||7.37||8.09|
Overall, Exxon stands out as one the premier energy firms and top dividend companies in the globe. The firm maintains an A plus credit rating and a beta lower than that of the market. It trades at a low historical price/sales ratio and at 19 times our expected earnings for 2017 of $4.25 a share. This estimate could end up being very low if oil rebounds towards sixty dollars a barrel. The firm’s dividend is well covered even if oil drops further, as Exxon has the financial resources to issue debt or make asset sales.
Along with other giants like Total SA and Occidental, it ranks among the Top 20 firms within our listing of dividend paying firms.
|Earnings per Share 2017 (projected)||4.25|
Based on the firm’s impeccable financial credit rating, low beta, elevated dividend yield and stability, Exxon Mobil Corp. qualifies as one of our Top 100 Dividend Stocks.
Chart Explanation: Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years.