Rising oil prices and a slimmed-down business model helped Exxon Mobil accomplish a historic milestone in its first-quarter profits report. The cash flow of the corporation was sufficient to fund the dividend and capital expenditures. Analysts were suggesting just a few months ago that Exxon would have to decrease its dividend.
Exxon Mobil (ticker: XOM) announced adjusted earnings of 65 cents per share on Friday, a nickel higher than Wall Street expectations. The company’s revenue of $59 billion exceeded analysts’ projections of $56 billion.
Is Exxon a good dividend?
In 2021, that wager paid off. This year’s resurgence in oil demand and rising oil prices resulted in an increase in operating cash and free cash flows. The following are the company’s first-quarter 2021 results:
In the first quarter of 2021, ExxonMobil generated more operating and free cash than it did in the entire year of 2020. As we continue to get beyond the coronavirus pandemic, this is a really optimistic indicator for ExxonMobil’s future. With shares still trading more than 40% below their five-year high, there’s a case to be made that the company still has potential to rise, providing even more reason to buy ExxonMobil now.
If you’re primarily interested in the dividend, the current yield of 6% is extremely appealing. Most significantly, at this point in the recovery, the payoff is likely to be quite solid.
Can ExxonMobil survive?
For years, the most common criticism of XOM shares was that its dividend was risky. ExxonMobil has struggled to ensuring that its operating cash flow exceeds its dividend costs since around 2015.
That doesn’t mean Exxon was profitable for the most of those years. It’s still a well-managed, low-cost producer with the ability to weather economic downturns.
Exxon, on the other hand, wasn’t making enough money to sustain its operations, create new projects, and pay its dividend. Despite its troubles, ExxonMobil refused to lower its dividend since it has placed its reputation on maintaining a huge dividend that it grows every year.
As a result, ExxonMobil increased its debt by more than $30 billion, mostly to prevent cutting its dividend. ExxonMobil’s decision was panned by analysts, who claimed the business was gambling with its future.
However, it appears that Exxon’s executives will get the final laugh. Exxon’s cash flow is set to rebound dramatically as oil prices approach their best levels in more than five years.
As a result, concerns about dividend reduction will be alleviated, and the company’s loyal shareholder base, i.e. income investors, will continue the course.
With so many other oil companies cutting dividends, Exxon has acquired some credibility as one of the few corporations in the sector that did not do so while oil prices were low.
The Great Oil Short Squeeze Is Coming
Oil is likely to climb for a variety of factors that are both basic and powerful. When major oil corporations are informed that they will no longer be able to drill for fresh oil discoveries, new petroleum supplies are reduced. Meanwhile, the world’s oil demand continues to rise.
That’s exactly what’s going on right now. The International Energy Agency (IEA) recently advised its member states to immediately halt the approval of new oil and gas projects.
Of course, not all countries will comply, but the IEA’s announcement was significant nonetheless. Meanwhile, ESG funds, which control a significant portion of the stock market through pensions and other institutional money, are selling all oil and gas stocks that do not become carbon neutral rapidly.
Oil and gas companies are being urged by governments and some large investors to halt exploiting new oil reserves.
Oil demand, on the other hand, is reviving as the pandemic diminishes. China and other major economies are already using more oil than they were in 2019. The United States isn’t far behind. Because of the reopening, analysts predict world demand for oil to rise another 5 million barrels per day by the end of the year (compared to supply of roughly 97 million barrels per day).
For the past decade, the United States has been a marginal oil producer. The Permian Basin, America’s main fracking region, saw oil production grow from less than 1 million barrels per day a decade ago to nearly 5 million barrels per day at its peak.
As firms like Exxon stop pursuing marginal new oil sources, production from these locations will begin to decline quickly. As any economics student knows, when supply falls and demand rises at the same time, prices rise significantly. Given the overall inflationary trend, oil prices are projected to surpass $100 per barrel in the coming years.
The Verdict on XOM Stock
ExxonMobil is just too big to turn around and head in the opposite direction. ExxonMobil will need years to significantly reduce its oil and gas fields and implement more renewable energy alternatives. In the meanwhile, the cash flow from its existing oil projects will be needed to fund its diversification ambitions.
As a result, ExxonMobil’s oil and gas activities will not be shut down tomorrow or anytime soon. Sure, it will increase production at a far slower rate than investors might have expected. But that isn’t always a terrible thing. After all, it was overproduction that produced the massive energy bust from 2014 to 2020.
With oil prices near $75 per barrel presently, a leaner, more focused ExxonMobil should benefit. Oil sands firms like Canadian Natural (NYSE: CNI) are a good choice for investors looking for significant oil corporations that are solely focused on fossil fuels.
Is Exxon a buy or sell?
Exxon Mobil is now rated as a Hold by the market. The average rating score for the company is 2.14, with 6 buy ratings, 10 hold ratings, and 5 sell recommendations.
What is the future of Exxon Mobil stock?
On July 30, Exxon reported its strong second-quarter earnings. $4.7 billion in net income equated to $1.1 per diluted share. The net loss was $1.1 billion a year ago.
Oil and natural gas demand, as well as quarterly chemical and lubricants contributions, fuelled the $5.8 billion increase in earnings. Exxon is expected to earn $4.29 per share in 2021 and $4.76 per share in 2022, according to analysts.
The cash flow generated by operating activities was $9.7 billion. The money was utilized to pay dividends, make capital investments, and pay down debt. Exxon has already reduced its debt by $7 billion by 2021. In addition, during the last 18 months, its cost-cutting efforts have saved company $4 billion in structural expenses.
“In our efforts to help society achieve its energy transition goals, our Low Carbon Solutions company made progress in discovering new opportunities and forming new partnerships in carbon capture and storage, hydrogen, and low-emission fuels,” stated CEO Darren Woods.
Alternative Energy Gaining Traction
Over the next few years, clean energy will become increasingly important. According to the International Energy Agency (IEA), oil demand is expected to peak in 2030. “In the absence of a wider shift in policies, it is still too early to forecast a rapid fall in oil consumption,” the IEA warned.
Is Exxon Mobil struggling?
HOUSTON, Texas — Exxon Mobil has endured unfriendly regimes, ill-fated ventures, and the disastrous Exxon Valdez oil disaster over the last 135 years. Throughout it all, the oil business profited handsomely.
However, Exxon is suddenly falling severely, its long-latent weaknesses exposed by the coronavirus pandemic and technology developments that promise to reshape the energy industry as a result of mounting climate change worries.
Is Exxon undervalued?
At its current price, Exxon Mobil (NYSE:XOM) appears to be considerably undervalued. XOM stock ended at $60.14 on July 8, although it has a very good valuation. It pays a very healthy 5.76 percent dividend yield and trades for only 16 times this year’s expected earnings, for example.
Using historical yield and price-to-earnings (P/E) criteria, I value XOM stock at $75.19 per share. As of July 8, this represents a potential upside of 25% for stock investors.
The company’s prognosis is also largely optimistic. Oil and gas prices have risen in recent months, particularly as global economic development has accelerated. Furthermore, according to Yahoo! Finance, analysts predict earnings per share (EPS) to reach $3.87 this year, up from a negative 33 cents EPS last year. And they expect $4.62 per share in 2022. On July 8, XOM stock was trading at $60.14, giving it a forward P/E of just 13 times earnings.
How often does Exxon Mobil stock pay dividends?
Exxon Mobil (ticker: XOM) announced Wednesday that it will increase its quarterly dividend for the first time since April 2019, putting an end to months of suspense.
Is XOM stock safe?
With the problems of 2020 behind it, the integrated oil and gas behemoth is no longer in danger of slashing its dividend. This year’s expected earnings ($4.28 per share) will more than cover the dividend.
Sure, there are still reasons for investors to factor in a risk premium. This is reflected in its forward yield of 6.3 percent, which is higher than its four-year average dividend yield of roughly 5.6 percent.
First, there’s the question of whether oil prices will continue to rise. Lower oil prices may rekindle concerns about a dividend decrease. Second, there are concerns about a social activist who recently earned numerous seats on Exxon’s board of directors. However, when you look at the details, both of these fears appear to be exaggerated.
Another surge in energy prices might send the stock skyrocketing once more. If you’re more interested in the current income than the prospective increases, you might choose to buy it now (about $55 per share).
What does ExxonMobil pay in dividends?
IRVING, Texas (CBSDFW.COM) – Exxon Mobil Corporation’s Board of Directors today approved a cash dividend of $0.88 per share on the Common Stock, which will be paid on December 10, 2021 to shareholders of record on November 12, 2021.
