Yahoo Finance Is It Smart To Buy Exxon Mobil Corporation (NYSE:XOM) Before It Goes Ex-Dividend?
It looks like Exxon Mobil Corporation (NYSE:XOM) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Exxon Mobil's shares before the 12th of May to receive the dividend, which will be paid on the 10th of June.
The company's next dividend payment will be US$0.88 per share. Last year, in total, the company distributed US$3.52 to shareholders. Based on the last year's worth of payments, Exxon Mobil has a trailing yield of 3.8% on the current stock price of $91.69. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Exxon Mobil can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Exxon Mobil
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Exxon Mobil is paying out an acceptable 58% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Exxon Mobil's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Exxon Mobil has grown its earnings rapidly, up 27% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Exxon Mobil could have strong prospects for future increases to the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Exxon Mobil has delivered 6.5% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is Exxon Mobil an attractive dividend stock, or better left on the shelf? Exxon Mobil's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Exxon Mobil for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Exxon Mobil (including 1 which is a bit concerning).
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
