As we all know, owning XOM stock is about owning its hefty cash flows. Despite the recent earnings hiccups, Exxon is still minting a ton of cash each year. And those cash flows are only going to get better as it produces more valuable oil and natural gas liquids. Prices for these commodities continue to be rich, and the various geopolitical events coupled with rising demand will only keep them high.
That benefits Exxon on the profit margin front. It also benefits investors in XOM stock, as the firm can now send more of that cash back into their pockets via dividend growth and buybacks. Exxon Mobil has increased cash dividends for the last 31 years at an average rate of 10% each year.
But more could be on the way.
Currently, the payout ratio of XOM stock is only about 33%. That leaves plenty of room for more increases down the line — especially when you factor in that Exxon will earning more for its production of oil and NGLs.
That only strengthens the appeal of Exxon’s bond-like nature. Shares of XOM stock can be had for a forward P/E of under 13. That could seem like a real long-term bargain once Exxon’s oil ambitions start flowing and cash flows trickle back to investors. And while Exxon yields just 2.7%, again, the potential for dividend increases down the road is attractive. After all, long term, it’s not about the yield right now, but your yield on cost.
For those looking for a steady Eddie dividend holding, XOM stock continues to be where it’s at.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.