ExxonMobil (XOM +3.85%) paid a total of $17.2 billion in dividends to shareholders last year, the second highest among S&P 500 companies. The oil giant currently has a nearly 3% dividend yield, which is almost three times the S&P 500's level of 1.1%.
The leading oil dividend stock's high yield enables investors to generate substantial passive income. A $3,000 investment in ExxonMobil could generate hundreds in dividend income in the coming years.
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A robust and growing income stream
With its stock price recently around $139 a share, you can buy 21 shares of Exxon for $3,000 without purchasing any fractional shares. The oil company currently pays a quarterly dividend of $1.03 per share ($4.12 annualized). At that rate, you'd collect $86.52 of dividend income in the first year. That's a nearly 3% income yield on your cost basis. If Exxon simply maintained its dividend, you'd collect $432.50 of income over the next five years.
However, Exxon will likely continue increasing its dividend. The oil giant raised its payment by 4% last year, extending its industry-leading growth streak to 43 consecutive years. The company has grown its payout at an average annual rate of 5.8% during that period.
NYSE: XOM
Key Data Points
Assuming a more modest growth rate of around 4% annually (its average in more recent years), here's how much dividend income you could collect from Exxon over the next five years:
|
Annual dividend rate |
Annual dividend income | |
|---|---|---|
|
Year One |
$4.12 |
$86.52 |
|
Year Two |
$4.28 |
$89.98 |
|
Year Three |
$4.46 |
$93.58 |
|
Year Four |
$4.63 |
$97.32 |
|
Year Five |
$4.82 |
$101.22 |
|
Cumulative |
$468.62 |
Data source: Author.
Ample fuel to grow its dividend
Exxon's past performance is no guarantee it will deliver similar results in the future. However, we can have a lot of confidence that the oil giant will continue to increase its dividend, given its strong current financial profile and a visible outlook for future growth.
The oil company delivered industry-leading financial results last year. It produced $28.8 billion of earnings and $52 billion in cash flow from operations. Meanwhile, it's $26.1 billion of free cash flow easily covers its dividend outlay. Exxon ultimately returned an industry-leading $37.2 billion in cash to shareholders last year, including share repurchases. It funded the additional cash distributions with its fortress balance sheet, ending the year with an industry-leading net-debt-to-capital ratio of 11%. These metrics strongly suggest that Exxon can continue paying its current dividend.
Meanwhile, Exxon raised its 2030 plan late last year. The company now expects to deliver $25 billion in earnings growth and $35 billion in cash flow growth by 2030 at constant prices and margins compared to 2024. This outlook implies compound annual growth rates of 13% for earnings and 10% for cash flow through 2030, with even higher per-share growth driven by its continued share repurchases. As a result, Exxon could potentially deliver even faster dividend growth over the next few years.
A high-octane income stock
Exxon is an elite dividend stock. The oil giant's combination of financial strength and visible growth should give it plenty of fuel to continue increasing its high-yielding payout. Because of that, a $3,000 investment today could yield hundreds of dollars in income in the coming years.
