Exxon Mobil's (NYSE:XOM) Shareholders Will Receive A Bigger Dividend Than Last Year

Exxon Mobil Corporation's (NYSE:XOM) dividend will be increasing from last year's payment of the same period to $0.91 on 9th of June. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.

Check out our latest analysis for Exxon Mobil

Exxon Mobil's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Exxon Mobil was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 39.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is comfortable for the company to continue in the future.

Exxon Mobil Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $2.28 in 2013, and the most recent fiscal year payment was $3.64. This works out to be a compound annual growth rate (CAGR) of approximately 4.8% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Exxon Mobil has grown earnings per share at 26% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Exxon Mobil's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Exxon Mobil that investors need to be conscious of moving forward. Is Exxon Mobil not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.