Friday, December 5, 2014

Exxon Mobil (XOM) Dividend Stock Analysis

Exxon Mobil Corporation (XOM) explores and produces for crude oil and natural gas. This dividend champion has paid dividends since 1911 and managed to increase them for 32 years in a row. One of the largest holders of Exxon Mobil is Warren Buffett, who recently bought the stock through his holding company Berkshire Hathaway.

The company has managed to deliver a 8.90% average increase in annual EPS over the past decade. Exxon Mobil is expected to earn $7.73 per share in 2014 and $7.75 per share in 2015. In comparison, the company earned $7.37/share in 2013.

Between 2004 and 2014, the number of shares outstanding has decreased from 6.512 billion to 4.346 billion. The consistent decrease in shares outstanding adds an extra growth kick to earnings per share over time. Exxon Mobil has one of the most consistent share buyback programs in the US.

The annual dividend payment has increased by 9.60% per year over the past decade, which is higher than the growth in EPS. The growth in dividends will probably be limited to 7%/annually in the next decade, given the size of the company.

Currently, Exxon Mobil is selling for 12.50 times forward earnings and yields 2.90%. I am slowly building my position in the company, and will likely do so over the next several years. I expect the stock to be mostly flat over the next few years, which would make accumulation easy. I expect to hold this company for the next 30 years, which is why I am willing to wait out a few cycles of boom and bust in commodity prices, or a period of potential flat production volumes. This is because I believe that the management team of Exxon Mobil can deliver solid long-term results for buy and hold investors.


Full Disclosure: Long XOM, CVX, BRK.B

Relevant Articles:

Why Warren Buffett purchased Exxon Mobil stock?
How to Generate Energy Dividends Despite the Peak Oil Non Sense
Has Charlie Munger gone senile on US Energy Independence?
Chevron Corporation (CVX): An Undervalued Dividend Star
Five Dividend Paying Companies with Consistent Share Buybacks

2 comments:

  1. Nice article. Good illustration of growing EPS through buybacks. One point that is rarely mentioned in energy company analyses is the dependence of petro chemicals in agriculture, especially for fertilizers. The growth in productivity of agriculture is linked to genetic engineering technology as well as more intensive use of fertilizers and other chemicals...much to the dismay of the green crowd. As the world's population and affluence continues to grow, so will the demand for agricultural commodities.

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  2. It's interesting to see how CVX and XOM are the only true big dividend oil stocks, that are true to their income seeking investors even now in 2016, where oil prices have plummeted. I guess that BP would fit this description as well, but their payout ratio is far too risky.

    Here is some interesting dividend data for Exxon:
    https://dividendplanet.com/exxon-mobil-xom-increase-history-yield

    Their payout ratio is only in the mid 70's which makes them royalty among the big oil stocks :-) On the other hand, I just read that the Rockerfeller foundation have sold their XOM stock, which is kind of funny, since Exxon (when it was founded) was started by Rockerfeller :-)

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