ExxonMobil dividend delivers as coronavirus punishes oil prices
Exxon’s payout looks 'pretty juicy' right about now
Exxon Mobil Corp.’s prized dividend is safe for now, even with a plunge in oil prices from a coronavirus outbreak hammering the energy giant.
CEO Darren Woods told investors this week that he's committed to a "reliable and growing" payout despite short-term challenges, noting ExxonMobil's 37-year track record of delivering on that goal.
The Irving, Texas-based company's 87-cent quarterly dividend represents a yield of 6.94 percent relative to its stock price. That outpaces the S&P 500's yield of 1.84 percent, according to FactSet. The 10-year U.S. Treasury note, meanwhile, had a yield of 0.924 percent as of Thursday, according to Dow Jones Market Data Group.
|XOM||EXXON MOBIL CORP.||109.66||+0.19||+0.17%|
|USO||UNITED STATES OIL FUND L.P.||66.42||+1.11||+1.70%|
“Nothing is bulletproof, but the balance sheet at Exxon is unbelievably strong,” Richard Steinberg, chief market strategist at The Colony Group, a Boston-based financial advisory firm with $11 billion in assets under management, told FOX Business. “Exxon is an extremely well-managed company, and it is a very good guardian for shareholders.”
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Exxon is equipped to weather an oil glut -- due in part to new methods of energy production such as fracking -- even with profit-margin challenges "now being compounded by the growing economic impact of the coronavirus that we're seeing around the world," Woods said during this week's presentation.
The COVID-19 outbreak has infected 95,333 people worldwide and killed 3,282, according to the latest figures from the World Health Organization. It has caused social distancing, a phenomenon in which people stay away from crowds, large events and traveling, helping tip oil into a bear market and the stock market into a correction.
West Texas Intermediate crude oil plunged 21.6 percent through Thursday from Jan. 21, the day COVID-19 was first reported in the U.S. The sharp selloff in oil, which was trading at $43.77 a barrel on Friday, prompted investors to dump Exxon shares, pushing their price down more than 25 percent and causing some to worry that the dividend might be cut, a notion Woods sought to quell.
During periods of stock-market volatility, high-paying dividend stocks with strong balance sheets are attractive to investors because if a stock is yielding 4 percent and, all of a sudden, it's yielding 5 percent, that “starts to look pretty juicy,” especially with a 10-year note yield of less than 1 percent, Steinberg said.
Natural buyers come into high-quality dividend stocks during volatile times, he added, which could “help smooth the ride for investors.”
While Exxon’s dividend appears to be safe for now, other companies' payouts may be at risk.
More than 100 companies have warned that the coronavirus outbreak is hurting first-quarter earnings and in hard-hit industries such as travel, executives "may wish to save cash,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, told FOX Business.
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Typically, he added, “dividends are the last to go.”