Exxon Mobil Corporation (NYSE:XOM) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Exxon Mobil investors that purchase the stock on or after the 15th of August will not receive the dividend, which will be paid on the 11th of September.
The company's next dividend payment will be US$0.91 per share, and in the last 12 months, the company paid a total of US$3.64 per share. Based on the last year's worth of payments, Exxon Mobil has a trailing yield of 3.3% on the current stock price of $109.56. If you buy this business for its dividend, you should have an idea of whether Exxon Mobil's dividend is reliable and sustainable. As a result, readers should always check whether Exxon Mobil has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Exxon Mobil
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Exxon Mobil paying out a modest 29% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 32% 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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Exxon Mobil has grown its earnings rapidly, up 23% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Exxon Mobil has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Should investors buy Exxon Mobil for the upcoming dividend? We love that Exxon Mobil is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Exxon Mobil looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Exxon Mobil is facing. For example - Exxon Mobil has 1 warning sign we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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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2023-08-10 10:13:42Z
CBMifWh0dHBzOi8vc2ltcGx5d2FsbC5zdC9zdG9ja3MvdXMvZW5lcmd5L255c2UteG9tL2V4eG9uLW1vYmlsL25ld3MvaGVyZXMtd2hhdC13ZS1saWtlLWFib3V0LWV4eG9uLW1vYmlscy1ueXNleG9tLXVwY29taW5nLWRpdmlk0gGBAWh0dHBzOi8vc2ltcGx5d2FsbC5zdC9zdG9ja3MvdXMvZW5lcmd5L255c2UteG9tL2V4eG9uLW1vYmlsL25ld3MvaGVyZXMtd2hhdC13ZS1saWtlLWFib3V0LWV4eG9uLW1vYmlscy1ueXNleG9tLXVwY29taW5nLWRpdmlkL2FtcA
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