Friday, September 3, 2010

ExxonMobil Dividend Stock Analysis

Company Information and Outlook

Exxonmobil (NYSE: XOM) is the world’s largest publicly traded integrated energy company, and has been in business since 1870.  It has numerous operations all over the world, in almost all developed nations and emerging economies.

XOM engages in the exploration, production, transportation, and sale of crude oil and natural gas. It also involves in the manufacture, transportation, and sale of petroleum products. The company manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and other specialty products. Exxon Mobil also has interests in electric power generation facilities

Exxon Mobil is the parent company of three major subsidiaries, Exxon, Mobil, and Esso.

The company operates three divisions, each with many subdivisions.  These are
-       Upstream (exploration, extraction, shipping, wholesale)
-       Downstream (marketing, refining, and retail operations), and
-       Chemical.

Upstream is the most profitable sector, followed by Downstream, then Chemical

XOM predicts an increase in world energy consumption by 35% by the year 2030, the majority of which will come from emerging markets.  Though light duty vehicles such as cars and trucks are expected to become more efficient and less reliant of fossil fuels, they believe that heavy duty vehicles for shipping goods to new economies (trucks, trains, ships, planes) will create the greatest demand.  Even with the shift to renewable resources, they expected crude oil will account for 80% of the worlds energy use until 2030, as no other source can match them at the moment.

Electricity production is expected to increase, as well as shift from less carbon intensive fuel generating to more renewable resources, as well as nuclear and natural gas.

Stock Analysis

Exxon Mobil has showed a solid and stable record of increasing its value over the past 10 years.  The energy business is cyclical and capital intensive, yet Exxon Mobil has very low debt levels, increasing sales, earnings per share and dividends, while also buying regularly back shares.  The rates show a negative growth in many cases, which is due to the terrible year 2009 was for the energy businesses, which Exxon Mobil was not the only victim.  However, if we remove 2009 from our calculations, we find solid, steady rates in increase in all categories.


Exxon Mobil is a dividend growth stock, having paid increasing dividends every year for 27 years

Dividend Growth
10 year
5 year
1 year

Payout Ratios
10 yr Avg.

The cash coverage was 0.74, which indicates cash flow per share was less than the dividend, but can be attributable to the low FCF of 2009.  In 2008 the coverage was 4.99, and 2007 was 4.79

Income Statement

Revenue Growth
10 year
5 year
1 year

Revenues have grown 3.1% in the last 10 years, and have had negative growth in the 5 year and 1 year periods, with the one year loss being 34%.  However, again this is attributable to 2009.  If we remove 2009 from our calculations we find a 9 year growth rate of 9.2%

EPS Growth
10 year
5 year
1 year

Over 10 years Exxon Mobil has averaged a 4% buyback rate of it’s shares

Balance Sheet

Balance Sheet Ratios
10 yr Avg.
Current Ratio
Lg T Debt / Equity
Tot Debt / Equity
Debt / Total Capital
Cash Return / Tot Capital

For a large company in a cyclical and capital intensive business, Exxom Mobil has a clean balance sheet.  They have kep their current ratio above 1 for the past 10 years, while increasing shareholder equity by 5% annually.

Cash Flow

Free Cash Flow
10 year
5 year

XOM has not had a single year of negative cash flow in the past 10 years]

In 9 of 10 years the FCF was more than enough to cover the dividend payment, but in 2009 it was not, and the cash flow payout ratio was 135%.  Other than that, the cash payout ratio has held steady in the 20% range, and only in the early 2000 did it climb to 63%.

Stock Price

Current Price
Est Forward P/E
Div Yield

Historically, the stock hasn’t traded this low since 2006, and is trading at 60% off it’s ten year high of 96.12


Overall, I think ExxonMobil is a good buy at this price.  The companies large international infrastructure creates economies of scale, and would require massive capital to reproduce.  It has operations all over the world, and since energy use is expected to stay flat for most of the developed world (especially the USA) for the next 20 years, they are well positioned to supply the emerging world with energy.  And since there is no technology  yet that can replace fossil fuels, especially to accommodate the insane growth of some economies, Exxon Mobil and the energy it produces will be in constant demand.

How do you feel about XOM?

1 comment:

  1. I agree with the conclusion. I'm fairly bullish on big oil companies at the moment. Many of them have very low valuations, substantial dividends, and dividend growth.

    I plan on publishing a stock analysis of Chevron soon (a stock fairly high on my current buy list), with Exxon coming after that.