Why Oil Majors' 7-11% Dividend Yields Could Be In Danger

Oil majors underperformed the market significantly over the last years, increasing their dividend yield significantly to 7-12%.
Investors are questioning the sustainability of dividends as oil prices dropped to a 18-year low and a recovery is not in sight due to the COVID-19 pandemic and price war.
In this article, I will create a model based on operational and financial parameters, which will try to predict whether the company will cut its dividends.
The results are worrying. BP and Exxon Mobil are very likely to cut their dividend soon. I am neutral on Shell and Total's dividend and could turn bearish if the OPEC meeting in June would give negative outcomes.
I believe that only Chevron has a high probability to maintain its current dividend. Together with recent insider buying activity, it could be an interesting buy.
I decided to write an article on oil companies after mentioning that there was some interesting insider buying activity in oil stocks. Doing research on the best stocks with insider purchases is my main priority as these outperform the market significantly.
Many investors rely heavily on their dividend income stream. One of the most stable dividend payers is the oil majors as most of them have increased their dividends for many decades in a row. After this year's 35-55% drop in oil majors' stock price, their dividend rose to 6.78% for Chevron (CVX) up to 11.25% for Shell (RDS-A). This is a consequence of oil prices dropping to their 20-year low which will put significant pressure on their free cash flows. On Seeking Alpha and many other platforms, I mentioned that most investors are wildly guessing and hoping that the dividend will be sustained, without digging deeper into the fundamentals of these companies. In this article, I will discuss the overall oil market circumstances and discuss which oil companies should be able to maintain their current dividend payout in the mid term. Overall, my research shows that if these market... Read more