Published Wed, 16 Sep 2020 16:33:58 -0400 on Seeking Alpha
Seeking AlphaDividend Ideas | Basic MaterialsExxon Mobil's Dividend: It Is No General Electric Or AT&TSep. 16, 2020 4:33 PM ET|| About: Exxon Mobil Corporation (XOM)by: Jonathan WeberJonathan Weber Cash Flow KingdomThe Investment Community where "Cash Flow is King"SummaryExxon Mobil can't cover its dividend through cash flows right now.
There is considerable risk of a dividend cut, but management could also maintain the payout by increasing debt instead.
Neither AT&T nor General Electric is a good comparison when it comes to the reliability of the dividend.
Exxon Mobil (XOM) is a well-regarded dividend growth stock among the retail investing crowd. In the past, it has delivered solid returns and reliable dividend growth, but due to a weak oil price environment, its dividend growth track record may be broken in the future.
There is a substantial risk of a dividend cut, although this is not a sure thing, of course. Exxon Mobil may very well be able to weather the current environment until oil prices have recovered. Much depends on management's willingness to raise debt levels in order to maintain the dividend.
Exxon Mobil is sometimes compared to either AT&T (T) or General Electric (GE), but I will show in this article why I believe that neither of these comparisons is a very good one.
Source: Seeking Alpha's image bank
In the past, Exxon Mobil has indeed been a piggy bank for those that bought at the right level:
Data by YChartsFor someone that bought in the 1970s, a $10,000 investment would have turned into more than half a million by now. If the investment would have been sold a couple of years ago, when Exxon Mobil's share price was much higher, the investment would have been a 100-bagger, as a $10,000 investment would have turned into more than a million dollars.
The ultra-long-term track record is thus not bad at all, but at the same time, we see in the above chart that the... Read more