Retirement planning involves active management of our portfolios, and that includes the occasional stock reallocation. Sometimes, you have to see whether an older holding is worth continued investment, or if you’d be better off putting the money to new uses.

I’m at such a crossroads right now, sitting on a modest investment in Exxon Mobil (XOM) accumulated through a dividend reinvestment plan for more than 30 years.

I’ve been amply rewarded — for tax purposes, the shares probably cost about $4 per share on a split-adjusted basis, plus I’ve seen years of quarterly income once I finally stopped using dividends to rebuy shares. But today I’m trying to decide whether XOM is worth another 10 years — a realistic time horizon for an income investment for me — or move onto another brand in the space.

Specifically, ConocoPhillips (COP).

Exxon is a stalwart dividend payer in the investment universe. Check out Dividend Growth Investor’s recent review of the stock and you’ll see exactly what I mean: 31 consecutive annual increases to its quarterly payout, plus 43% dividend growth in the past three years that includes a 10.5% hike to 63 cents per share earlier in 2013.

Looking at the books, Exxon generated $56 billion in net operating cash flow in its latest fiscal year, with $21 billion available after capital expenditures, and $11 billion left after dividend payments. That’s great … but given the availability of XOM’s excess cash flow and nearly $10 billion cash hoard, 10.5% seems a little stingy. So does its payout ratio, which has averaged about 24% during the past three years.

I can’t help but wonder if I’ll see anything more aggressive than the current rates of dividend growth XOM has been flashing.

Now let’s look at ConocoPhillips. The oil and natural gas exploration, producer and distributor is what’s left after COP sun off downstream entity Phillips 66 (PSX) in 2012. COP generates $58 billion in annual revenue, turning it into $8 billion in profit.

Meanwhile, ConocoPhillips managed to pump out nearly $14 billion in net operating cash flow for fiscal 2012 and sat on around $3.6 billion in cash, so its $3.2 billion paid out in dividends is well-covered.

In January 2013, our friends at Dividend Growth Investor picked COP — and used it to replace XOM in its energy lineup — because its dividend has grown by an average of 14.2% annually during the past 10 years, well ahead of XOM. ConocoPhillips’ yield also is significantly higher than Exxon’s right now, at 4.1% to Exxon’s 2.9%.

ConocoPhillips got another recommendation from Tom Taulli, who had bought into COP’s long-term potential and dividend profile.

Armed with two solid recommendations, I’ve been watching the stock since early this spring. While I’ll admit that three consecutive periods of declining (quarter-over-quarter) revenues had me a bit unnerved, net income grew over that same period, and net operating cash flow is running at $3.47 billion as of the most recent quarter.

However, dividend growth is a bit of an issue. While ConocoPhillips has improved its payout about 25% over the past three years to its current 69-cent payout, that mostly came on a big jump in early 2011 from 55 cents to 66 cents — where the dividend stayed until June, when it was raised by a scant 5%.

COP’s payout ratio is more generous at nearly 45%, though it’s not so high that Conoco doesn’t have more room to stretch its dividend. But I’m not sure the company’s earnings will keep growing in concert.

The Verdict

So should I stay or should I go? Well, here are my final thoughts:

• My tax basis in XOM is such that a capital gains hit has to be a consideration. Instead of putting all my Exxon money into COP, it would be net funds after the taxes … and a considerable drop in how much I could invest in COP.
• Exxon’s payout ratio is lower, but its recent dividend increase history suggests this might change. It’s a leap of faith, but one with some merit. Any increases also should help put XOM’s yield on cost north of 3%, which still would be behind COP, but more palatable.
• COP has scale, but Exxon has even more of it. Plus, stability is key, and XOM has enough on the natural gas side to help balance out the oil.

So for now, I’m going to stay the course with Exxon. At least until the next suitor comes along.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long XOM.

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