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Exxon Mobil Cannot Cover Its Dividend, And That's Great News

Published Sun, 16 Feb 2020 09:45:00 -0500 on Seeking Alpha

SummaryExxon Mobil hovers near multi-year lows as an entire generation shuns the broken stock.
The dividend coverage does not remotely look good.
We break down what this means for the stock.
We also take the time to recommend a better choice.
Co-produced with Trapping Value
Exxon Mobil (XOM) has certainly divided the investment community. Bulls argue that this price is the best thing since sliced bread. Bears argue that if XOM keeps contributing to climate change, we won't have any bread. The debate rages on. Certainly history has been on the side of the bears. XOM stock price has barely budged since Feb. 24, 2005.
Data by YCharts
The rearview mirror look is fantastic, but we have to analyze not what XOM's price did, but what it will do in the next 15 odd years. To do that we have to understand why XOM is struggling and why that struggle is putting pressure on it to fund its dividend.
The company
XOM is the largest integrated oil company with a big global reach. From oil production, to refining and marketing, XOM has its hands in everything related to energy. At one point it also was the largest company by market capitalization.

Of course, the only thing constant is change and XOM's market cap has shrunk while technology stocks have now taken over the world. We could go on and on about XOM's introduction, but pretty much everyone does know what the company engages in. Instead of doing that, we will jump straight to the key issue with XOM. The inability to grow and pay its dividend.
A brief history of big problems
XOM cannot grow. Since 2006, about the time from where its share price has been flat, its production as expressed in thousands of oil equivalent barrels per day (MBOE) has actually declined.

Source: Author, from company filings
That's an incredibly long time frame and puts to ease any doubts about any temporary issues. World production of course has grown in that time frame, both for oil and natural... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
OCCIDENTAL PETROLEUM 45.40   9.0 5.05 3.16 6.81
IMPERIAL OIL 26.59   0.0 0.00 0.66 2.49


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