ConocoPhillips (COP -0.34%) has increased its dividend three times in the last two years or so, upping the payment by an impressive 22%. That's an enticing number if you are an income investor, but it comes with a risk.

Here's what you need to know before you buy ConocoPhillips -- and why ExxonMobil Corporation (XOM -0.08%) and Chevron Corporation (CVX 0.52%) are both better options for dividend investors.

Heavy oil

Back in 2012 ConocoPhillips spun off Phillips 66, jettisoning its downstream refining assets and focusing its business on upstream oil and natural gas drilling. Essentially, ConocoPhillips became a pure-play exploration and production company, with its top and bottom lines reliant on the ups and downs of volatile commodities. The company benefits greatly when oil and gas prices are heading higher, but when energy prices are falling, it takes the brunt of the drop.

Two men standing in front of an oil well

Image source: Getty Images.

Right now the business shift is a net benefit because oil prices have been heading broadly higher for a couple of years, which explains the dividend increases. However, if oil prices fall, that dividend may not be sustainable. For evidence, look at what happened when oil prices started to fall in mid-2014: That drop led ConocoPhillips to cut its dividend by 66% in 2016. If you want consistent dividends, ConocoPhillips' upstream focus and dividend history (despite the recent dividend hikes) suggest you should be looking elsewhere.

A look at two better dividend options

Exxon has a long, conservative history. For starters, it has increased its dividend every single year for 36 consecutive years. Rewarding investors with a steadily growing dividend is clearly important to management. Backing that history up is a broadly diversified business spanning from upstream oil and natural-gas drilling to downstream refining and chemicals. When upstream is struggling, downstream usually benefits, because oil is a primary input.

XOM Dividend Per Share (Annual) Chart

XOM Dividend Per Share (Annual) data by YCharts.

This was highlighted in 2015, when oil prices were plummeting: Exxon's upstream business saw earnings fall 75% while downstream earnings more than doubled. Upstream is a bigger contributor to performance, so the end result was a 50% earnings decline, but the downstream business clearly softened the blow of a brutal oil-price decline.

On top of that diversification, Exxon also has one of the strongest balance sheets in the energy industry; long-term debt makes up just 10% of its capital structure. The company sports a 4% yield today, and dividend growth over time will probably be in the mid- to high single digits (around where it's been historically). It's dealing with some near-term production issues right now, but it has a plan to pump more oil in the future. Investors looking for consistent dividends should like what they see here.

If the dividend history at Exxon sounds enticing, but you still find ConocoPhillips' upstream focus enticing, then you might want to look at Chevron. This oil giant has both upstream and downstream exposure, but its business is tilted more toward oil and natural-gas drilling than Exxon's. Oil and gas drilling has recently accounted for around 90% of Chevron's earnings, compared to about 75% at Exxon.

XOM Financial Debt to Equity (Quarterly) Chart

XOM Financial Debt to Equity (Quarterly) data by YCharts.

That's good and bad news. For example, as oil prices have recovered, Chevron has clearly seen the benefit of its upstream focus. However, when oil prices tumbled, Chevron held its dividend static for 10 consecutive quarters (two and a half years). The only way it was able to maintain its streak of 31-consecutive years with higher dividend payments was the timing of those increases.

Chevron, meanwhile, is pretty fiscally conservative; long-term debt makes up around 16% of its capital structure. Like Exxon it can easily lean on its balance sheet to work through the next downturn, just as it did during the last -- and, along the way, keep paying dividend investors for sticking around. The stock yields around 3.9% today.

That said, management has taken a fairly conservative approach to its capital spending plans, which is notably different from its peers. However, it's still worth a deep dive if you like the oil focus of ConocoPhillips but prefer a more consistent dividend payer.

Through the cycle

There's nothing inherently wrong with ConocoPhillips, so long as you go in knowing that the business is leveraged to the ups and downs of oil and natural-gas prices. However, if you are a dividend investor, the downs can be pretty tough, with the last downturn leading to a huge dividend cut at the oil driller.

A better option for conservative types would be Exxon, which has a long history of increasing its dividend every year, a more diversified business, and a rock-solid balance sheet.

For those who lean more toward oil, Chevron is a pretty good compromise. It's not as diversified as Exxon and its balance sheet isn't quite as strong, but it has proven it can keep rewarding dividend investors through hard times just the same.

The key with both, however, is that they've shown they can handle the ups and the downs of the cyclical energy business better than ConocoPhillips.