Is Exxon a Great Dividend Stock?
ExxonMobil (NYSE: XOM) has treated its investors like royalty over the years. The
However, while Exxon has been an excellent
On solid ground even in the volatile oil patch
Exxon's dividend currently clocks in at a 5.1% yield, which is well above the 2% average of stocks in the S&P 500. While higher yields can often imply higher risk, that's not the case with Exxon's payout. Through the third quarter, the oil giant had generated a hefty $23.4 billion in cash flow from operating activities, which was more than enough to cover the roughly $11 billion it paid out in dividends. While cash flow is down from $27.4 billion in the year-ago period because of all the volatility in the oil and gas market, the company still generated lots of excess cash after paying its dividend to invest in expansion projects.
Exxon, however, has invested $22.7 billion on expansions so far this year, outspending its cash flow by a wide margin. That's by design, though, as the company is in the middle of an ambitious
With a business that's generating a gusher of cash, a top-tier balance sheet, and an active asset sale program, Exxon's high-yielding dividend appears to be on sustainable footing.
Plenty of fuel to drive growth
Exxon's multiyear expansion program should increase its output by 1 million barrels of oil equivalent per day (BOE/D) by 2025. That implies a 25% increase from 2017's baseline level, which is a huge jump for such a large oil producer. The company believes that its investments to grow its
Exxon is investing in several major projects around the world, including in the
ExxonMobil appears poised for more dividend greatness
Exxon's base plan would see it grow its cash flow by 7% per year through 2025, assuming oil prices remain roughly flat at around $60 a barrel. Meanwhile, it can still grow its cash flow at a healthy rate even if crude slumps to $40 a barrel. Because of cash flow growth, and its healthy balance sheet, it seems likely that Exxon will be able to continue increasing its high-yield dividend. That makes it a great stock for income-seeking investors.
10 stocks we like better than ExxonMobil
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