Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Exxon Mobil Corporation (NYSE:XOM) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Exxon Mobil's shares before the 14th of November in order to be eligible for the dividend, which will be paid on the 9th of December.
The company's next dividend payment will be US$0.91 per share. Last year, in total, the company distributed US$3.64 to shareholders. Based on the last year's worth of payments, Exxon Mobil stock has a trailing yield of around 3.2% on the current share price of $114. If you buy this business for its dividend, you should have an idea of whether Exxon Mobil's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out the opportunities and risks within the US Oil and Gas industry.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Exxon Mobil paid out a comfortable 29% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Exxon Mobil's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Exxon Mobil's earnings have been skyrocketing, up 46% per annum for the past five years. Exxon Mobil is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Exxon Mobil has delivered 6.8% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Exxon Mobil an attractive dividend stock, or better left on the shelf? Exxon Mobil has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Exxon Mobil, and we would prioritise taking a closer look at it.
In light of that, while Exxon Mobil has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Exxon Mobil (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Valuation is complex, but we're helping make it simple.
Find out whether Exxon Mobil is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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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2022-11-09 10:22:55Z
CBMifWh0dHBzOi8vc2ltcGx5d2FsbC5zdC9zdG9ja3MvdXMvZW5lcmd5L255c2UteG9tL2V4eG9uLW1vYmlsL25ld3Mvd2h5LXlvdS1taWdodC1iZS1pbnRlcmVzdGVkLWluLWV4eG9uLW1vYmlsLWNvcnBvcmF0aW9uLW55c2V40gGBAWh0dHBzOi8vc2ltcGx5d2FsbC5zdC9zdG9ja3MvdXMvZW5lcmd5L255c2UteG9tL2V4eG9uLW1vYmlsL25ld3Mvd2h5LXlvdS1taWdodC1iZS1pbnRlcmVzdGVkLWluLWV4eG9uLW1vYmlsLWNvcnBvcmF0aW9uLW55c2V4L2FtcA
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