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Exxon Mobil $XOM One of several names in the energy sector attempting to form a bottom
By: TrendSpider | January 25, 2024
• $XOM One of several names in the energy sector attempting to form a bottom.
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Bullish RSI divergence into new 52-week lows for Exxon... $XOM Reversal incoming?
By: TrendSpider | January 22, 2024
• Bullish RSI divergence into new 52-week lows for Exxon... $XOM
Reversal incoming?
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Just How Safe Is Exxon Mobil Stock's Dividend?
By: 24/7 Wall St. | January 22, 2024
A key component of income investing is a portfolio that includes safe dividends, those that are unlikely to shrink or disappear. Recognizing when a dividend is stable and safe can be a challenge. Yet, certain metrics can offer clear signs for the investor looking to establish or shore up such a portfolio. What do these metrics tell us about the quarterly dividend at Exxon Mobil Corp. (NYSE: XOM)?
Exxon’s most recent payout was $0.95 a share, and the yield is now about 3.9%. The next ex-dividend date is expected in February. The current yield is less than that of competitors BP PLC (NYSE: BP), Chevron Corp. (NYSE: CVX), Shell PLC (NYSE: SHEL) and TotalEnergies S.E. (NYSE: TTE). It is also lower than the oil and gas integrated industry average yield of about 5.7%.
Dividend Aristocrat?
One clear sign of whether a dividend is stable and safe is if the company is a Dividend Aristocrat. Those are companies in the S&P 500 that have not only paid a dividend consistently for 25 years but have increased their payouts every year as well. Exxon has grown its dividend for 40 consecutive years. If it keeps that up, it will be a Dividend King in another decade, (See the seven highest-yielding 2024 Dividend Kings to buy and hold forever.)
Other Valuation Metrics
While being a Dividend Aristocrat is a good sign, other financial metrics provide additional insight.
The dividend payout ratio indicates how much of a company’s earnings are paid out as a dividend. It is a sign of how safe a company’s dividend is and how much room it has for future growth. The higher the ratio, the greater the risk. Income investors often look for a dividend payout ratio of less than 60%. Exxon currently has a dividend payout ratio of about 36%. That is lower than the industry average and less than the company’s average dividend payout ratio of 66% over the past decade.
A look at free cash flow reveals whether the company has the funds required for its payout, as well as for share repurchases or even paying down debt or making acquisitions. Income investors prefer growing free cash flows. The free cash flow at Exxon has surged in the past couple of years, coming in at $63.6 billion for 2022. However, since 2010 annual figure has varied considerably. That pattern is similar for the competitors mentioned above as well.
Return on invested capital is a measure of how well a company allocates its capital to profitable projects or investments. Again, the thing to look for is stability, specifically a double-digit ROIC over many years. Exxon’s current ROIC is near 13%. However, the figure varies here too, from as high as 26% or so to -10% in the past 10 years. The current ROIC is lower at Chevron, Shell and TotalEnergies.
Operating margin is a measure of the percentage of revenue a company keeps as operating profit. Here too the preference is for a stable double-digit percentage increase. The current figure is near 19.9%. However, the margin drifted lower for much of the past decade, and for much of 2021 it was in the red. The operating margins at the competitors mentioned above are lower.
A look at sales growth offers a clue to the volatility or cyclical nature of the business. Steady, moderate growth, say 3% to 7%, is ideal. Perhaps not surprisingly, this metric is also volatile at Exxon. Between 2012 and 2022, annual revenue ranged from $480.6 billion to $181.5 billion, and it has declined in recent quarters. Here too the pattern is similar across the industry.
A company’s net debt-to-capital ratio also can signal whether a dividend may be at risk. Because too much debt can put dividends at risk in hard times, a lower ratio is considered better. A debt-to-capital ratio above 0.6 usually means that a business has significantly more debt than equity. That ratio at Exxon is less than 0.2 and has been for most of the past decade.
Probably the most popular valuation metric is the price-to-earnings (PE) ratio. This indicates whether a stock is expensive or cheap at its current market price, compared to the broader market or to competitors. Exxon has a trailing PE ratio of about 9.6 and a forward PE of more than 10. That compares with a historical benchmark of 15, as well as the broader market’s current 24 or so. Shell and TotalEnergies have PEs near the industry average of around 7, while at BP it is lower and at Chevron it is in the same ballpark as Exxon’s. (See which five blue chip dividend stocks make up 75% of Warren Buffett’s portfolio.)
And finally, the number of shares outstanding is worth a look. When companies buy back their shares, that number shrinks. But secondary offerings of stock increase that number. Investors tend to prefer a declining total, as that increases their stake over time. For Exxon, the number of shares has been a steady 4.2 billion or so since 2015. The company aims to increase its annual share repurchase program to $20 billion in 2024 through 2025.
Summary
Based on these metrics, it seems reasonable to say that Exxon’s dividend is safe, but some of the metrics bear watching.
Dividend Aristocrat ✔
Dividend payout ratio ✔
Free cash flow X
Return on invested capital X
Operating margin X
Sales growth X
Net debt-to-capital ratio ✔
PE ratio ✔
Shares outstanding ✔
Exxon’s long history of annual payout hikes is comforting for income investors. Yet, while the dividend payout ratio is reasonable for now, the question is whether revenue growth and free cash flow will support it going forward.
The consensus recommendation of analysts is a cautious Buy. However, their mean price target of $125.71 suggests that they see more than 30% upside in the next 12 months, despite current geopolitical concerns and slow demand growth.
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Exxon to buy another 1.2 million tonnes of LNG per annum from Mexico Pacific
By: Investing | January 16, 2024
MEXICO CITY (Reuters) - Mexico Pacific said on Tuesday it had reached a deal to supply Exxon Mobil (NYSE:XOM) with an additional 1.2 million tonnes per annum of liquefied natural gas, clearing the way for a final investment decision to expand its Saguaro Energia LNG plant.
ExxonMobil LNG Asia Pacific tied up the agreement to buy the LNG from a proposed third train, or production unit, at the Saguaro Energia project on Mexico's west coast, Mexico Pacific said in a statement.
Under the new deal, Exxon will buy the LNG on a free-on-board basis over a 20-year term.
With the agreement, Houston-based Mexico Pacific has locked in the sales required to make a final investment decision later this year on building the third train, CEO Ivan Van der Walt said in the statement.
The new pact follows on a deal late last year under which Exxon agreed to buy about 2 million tonnes per annum from Saguaro Energia's first two LNG trains.
The Saguaro Energia project is set to ship 15 million tonnes per annum of LNG to Asia, using gas from the U.S. Permian Basin. The project has a price tag of over $15 billion, officials from the Mexican state of Sonora said last year.
Reuters has emailed Exxon a request for comment.
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ExxonMobil, Chevron, and ConocoPhillips stocks dip after Saudi oil price cut
By: Investing | January 8, 2024
NEW YORK - Shares of leading oil companies ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), and ConocoPhillips (NYSE:COP) experienced a decline following Saudi Arabia's announcement of a $2 per barrel cut in its oil export prices. The decision by one of the world's largest oil exporters sent ripples through the market, resulting in a significant drop in crude oil benchmarks. West Texas Intermediate (WTI) crude fell over 4% to just under $71, while Brent crude slipped about 3.5% to approximately $76 per barrel.
The stock prices of ExxonMobil, Chevron, and ConocoPhillips reflected the impact, with ExxonMobil's shares falling by 2.68%, Chevron's by 1.65%, and ConocoPhillips' by 2.84%. This downturn occurred despite recent upgrades from financial services firms Truist and Piper Sandler, which had raised their price targets for these oil majors in anticipation of stable or improving oil prices.
Despite the immediate market reaction, analysts remain optimistic about the oil sector's prospects. Truist predicts that WTI crude will average $78 per barrel in 2024, and points to the substantial returns these companies have previously generated. Collectively, ExxonMobil, Chevron, and ConocoPhillips earned $55.5 billion, and projections suggest profits could reach around $74 billion for the year if oil prices stabilize.
Analysts are also highlighting the potential undervaluation of energy stocks given their current price-to-earnings (P/E) ratios. They advise investors to maintain their holdings through market fluctuations, signaling a belief in the resilience and long-term profitability of the energy sector despite short-term price volatility.
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as oil prices go down due to increased oil production, which incidentally I was saying last year that oil producers refused to increase production and blaming it on the WH...NOW LOOK AT THEM GO!!! look for NRGD to go up...
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