Exxon Mobil Corporation Stock Reaping Benefits of the Trump Dividend
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Exxon Mobil Corporation (NYSE:XOM) reports earnings before the market opens this morning and analysts are expecting big things. In the run-up since mid-September, XOM stock gained 4.2% compared to 2.6% for the S&P 500 Index.
The consensus is it will earn 90 cents per share, against last quarter’s 78 cents, on revenue of $63.8 billion, versus $60.8 billion during the last quarter.
Call it the Trump dividend.
Despite the horrors of Hurricane Harvey, it’s the company’s refining operations along the Gulf Coast that are delivering the good news. Oil bulls like Mark Tepper, CEO of Strategic Wealth Partners, are urging that investors overweight energy as the benefits of higher crude prices should filter into earnings during the fourth quarter, providing a second-stage boost.
But if you’re going to get into Exxon Mobil, you need to decide quickly, because the best reason to own the stock may be about to disappear.
Capture the Yield
With its quarterly dividend of 77 cents per share now confirmed and to be paid on Dec. 11 to shareholders of record Nov. 13, Exxon Mobil sports a yield of 3.7% at current prices.
For income investors, that means you’re getting 25% more cash out of Exxon Mobil shares than a 30-year bond, which now pays you 2.97%. Income is the reason investors should own XOM, so if the shares spike after earnings, or on anticipation of a winning fourth quarter, your best reason to own it disappears.
At its present level of about $83 per share, Exxon is still trading for $10 less than it traded a decade ago. But during that time, it has delivered a steadily rising stream of dividends, doubling the rate from 35 cents per share in 2007 to today’s 77 cents. If you caught it at its 2010 bottom, when it traded below $60 per share, you are sitting pretty.
As baby boomers age out of the workforce and into retirement, these kinds of calculations will prove increasingly important. The search for yield is going to replace the search for growth in 40 million portfolios, and right now Exxon has it.
Profits are Downstream
The key to those profits is Exxon Mobil’s diversification. It is an integrated oil, able to profit from drilling for it, moving it around to arbitrage its price, and refining it, both for the U.S. market and for export.
https://www.investorplace.com/2017/10/exxon-mobil-corporation-stock-reaping-benefits-of-the-trump-dividend/
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