We received $97.20 (129.6267 shares x 75 cents) from Exxon (XOM). This is the 4th quarter that Exxon is paying dividends per share at 75 cents. We are expecting a dividend increase by the next quarter. In Q42016, Exxon’s stock price increased by +7%. The increase in stock price is due to OPEC’s plan in cutting oil production, thus, increasing world oil prices. The firm reported US$1.9bn revenues from its upstream segment, largely due to the high oil prices, but it was offset by a US$2bn impairment charges. Due to the one-off charges, Q4 earnings posted US$1.7bn, down from US$2.8bn in Q42015.
The dividend yield is +3.6%. In 2016, the dividend yield has stayed between +3% to +4% range. Exxon’s stock price has been volatile. The stock price was increasing in 1H2016 as world oil price is gaining momentum but in 2H2016, the stock price has slightly decreased as Exxon reported that its investment levels (capital and exploration investments) is below the US$23.3bn company target. This means that future revenue might be lower as no new oil fields are being discovered. These situations have made the stock price very volatile in 2016, thus, the dividend yield has been in the +3% to 4% dividend yield range. We are expecting that the volatility will still continue in 2017.
The dividend payout ratio is 1.5. The high dividend payout ratio is due to the weak earnings in 2016. We are expecting that the dividend payout ratio will be lower by next quarter as the one-off charges in Q4 will not be reflected. The upstream segment will drive revenue growth in the next quarter.
The annual dividend growth rate between 3yrs to 10 yrs has been between +6.6% to +9.4% range. For the 1yr dividend growth rate, the firm posted a +3.50 growth. Exxon has been increasing its dividend since 2002 and we are expecting that by next quarter, the firm will continue to increase its dividend.
Based from the analysis, 1H 2017 will be volatile for Exxon as the firm has been slow in increasing its revenue based from a high world oil price. Nevertheless, we are expecting a dividend increase in the next quarter between +2.5% to +4% growth rate.