Why You Might Be Interested In Exxon Mobil Corporation (NYSE:XOM) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Exxon Mobil Corporation (NYSE:XOM) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Exxon Mobil's shares before the 12th of February in order to receive the dividend, which the company will pay on the 10th of March.

The company's upcoming dividend is US$0.99 a share, following on from the last 12 months, when the company distributed a total of US$3.96 per share to shareholders. Looking at the last 12 months of distributions, Exxon Mobil has a trailing yield of approximately 3.7% on its current stock price of US$108.43. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Exxon Mobil

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Exxon Mobil paid out a comfortable 49% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Exxon Mobil's earnings per share have risen 18% per annum over the last five years. Exxon Mobil is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Exxon Mobil has increased its dividend at approximately 3.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Exxon Mobil is keeping back more of its profits to grow the business.

To Sum It Up

Is Exxon Mobil worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Exxon Mobil paid out less than half its earnings and a bit over half its free cash flow. Exxon Mobil looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Wondering what the future holds for Exxon Mobil? See what the 19 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.