Exxon Mobil: Potential Dividend Cut Signal

Seeking AlphaDividend Ideas | Basic MaterialsExxon Mobil: Potential Dividend Cut SignalDec. 1, 2020 3:08 PM ET|| About: Exxon Mobil Corporation (XOM), Includes: OXY, XLEby: Bill MaurerBill Maurer Long/Short Equity, Long Only, Short Only, GrowthSummaryCEO comments do not provide say current dividend is safe.
Cash flow numbers not looking good at moment.
Company needs oil price rebound to continue.
There have been many energy stocks hard hit during the coronavirus as oil and gas prices have dropped. One of the most significant impacts has been to industry giant Exxon Mobil (XOM), formerly the largest US company by market cap. Right now, the biggest question surrounding the name is regarding its dividend, and the latest news from the firm would seem to indicate a dividend cut is on the horizon.
Exxon Mobile has had a solid dividend for years. As the graphic below shows, the current rate of $0.87 per share per quarter is just about double where the dividend was a decade earlier. However, the payout was not raised this year, so the latest raise was in Q2 2019. At Monday's close, mostly due to the fall in shares this year, the annual yield was 9.13%. That gives the name the third highest current yield in the S&P 500 index.

(Source: Seeking Alpha XOM dividend page, seen here)
When the company announced its third quarter results, management detailed a third straight quarterly loss. While the loss wasn't as bad as expected, it still was nearly $700 million on a GAAP basis, and revenues plunged by nearly 30% to a below consensus $46.2 billion. With the downturn in oil prices impacting results, future capital expenditure forecasts were reduced.
When it comes to the dividend, however, it is all about cash. No matter how profitable or not the business is, you can't normally pay a dividend if you don't have positive cash flow. This is of course you borrow lots of debt, which Exxon is currently doing. In the table below, I've shown some key cash flow data... Read more