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 three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Thus, you can purchase Exxon Mobil’s shares before the 11th of August in order to receive the dividend, which the company will pay on the 9th of September.
The company’s next dividend payment will be US$0.88 per share, on the back of last year when the company paid a total of US$3.52 to shareholders. Based on last year’s value of payments, Exxon Mobil has a trailing yield of 4.0% on the current stock price of $88.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Exxon Mobil has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Exxon Mobil
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately, Exxon Mobil’s payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Exxon Mobil generated enough free cash flow to afford its dividend. Fortunately, it paid out only 30% of its free cash flow in the past year.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings do not drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. 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 38% per annum 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 favorable 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.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Exxon Mobil has delivered an average of 6.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is Exxon Mobil an attractive dividend stock, or better left on the shelf? 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. It’s a promising combination that should mark this company worthy of closer attention.
On that note, you’ll want to research what risks Exxon Mobil is facing. To help with this, we’ve discovered 2 warning signs for Exxon Mobil (1 is concerning!) that you ought to be aware of before buying the shares.
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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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 into account 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.