Exxon Mobil: Committed To Dividend, Shares A Buy
Seeking AlphaDividend Ideas | Basic MaterialsExxon Mobil: Committed To Dividend, Shares A BuyDec. 1, 2020 10:51 AM ET|| About: Exxon Mobil Corporation (XOM), Includes: HESby: Randall ConnallyRandall Connally Long/Short Equity, Special Situations, Value, debtSummaryMany commentators and analysts have voiced concern, even doubt, about Exxon's ability to maintain its current quarterly dividend at $0.87 per share.
Management is committed to maintaining the dividend and has ample basis to do so based on historical precedent and line-of-sight visibility with respect to key development projects.
A study of historical total cash returned to shareholders reveals that Exxon is not in unfamiliar waters. The company has the will and means to maintain the dividend.
Provided oil prices continue to firm up and Guyana development projects remain on target, the divided can be maintained for 2021/2022 and looks reasonable for 2023 and beyond.
Exxon is a buy at current levels with share price backstopped by solid asset portfolio and exceptional yield.
Much digital "ink" has been spilled debating if Exxon Mobil (NYSE: XOM) can maintain its dividend. The company is clearly committed to maintaining the dividend and has reiterated that commitment many times during the course of 2020.
Exxon is, no doubt, in a tighter financial spot than it would like to be and frankly, I think the payout ratio is too high. I would like to see it come down. But the way I believe the payout ratio will come down is by Exxon growing free cash flow, not cutting the dividend.
In a November 30, 2020, press release Chairman and CEO Darren Woods announced a number of cost saving initiatives and asset high grading measures intended to allow the company to maintain a reliable dividend.
These words suggest to me the company intends to grow free cash flow into supporting the dividend instead of cutting the dividend.
Among other initiatives announced, the company is reducing global workforce by... Read more
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