admin
Exxon Mobil ended 2023 on a high note, but investors still seem unsure about the stock.
The shares gained less than 1% on Friday, even though the company reported earnings that beat analysts’ expectations and offered positive guidance for 2024. In fact, Exxon stock is still off 14% from its 2023 highs.
Friday morning,
Exxon Mobil
posted adjusted earnings of $2.48 a share for the fourth quarter, compared with the consensus estimate of $2.20, according to FactSet.
Earnings for the year totaled $36 billion, down 35% from 2022, which was a record year for profits. The company outperformed its production guidance in its two key projects—the Permian Basin of Texas and New Mexico, and offshore Guyana—after spending slightly more money than expected.
“Solid operational performance has driven top-tier financial performance,” wrote Raymond James analyst Justin Jenkins.
The biggest reason that Exxon stock remains down from its 2023 peak is oil prices have been relatively weak lately, because of a global oversupply of oil. But investors might also be choosing to invest in other oil companies because Exxon’s dividend yield is now the lowest of the five oil majors. Its 3.7% dividend yield is still high for
S&P 500
stocks, but it trails
Chevron’s
4.3% after Chevron boosted its own payout Friday.
It isn’t that Exxon is paying out small sums to investors. The company spent $14.9 billion on dividends in 2023 and another $17.4 billion on buybacks, equaling nearly all of its free cash flow. Those figures will be even higher going forward, given Exxon’s announcement of a 4% dividend hike and $20 billion annual buyback target late last year.
But some of those buybacks will be offset by the company’s decision to fund its purchase of
Pioneer Natural Resources,
a major shale-driller, with stock. And Exxon’s 4% December dividend increase now looks modest compared with Chevron’s 8% hike on Friday. Exxon CEO Darren Woods said in December the company needs to make sure the dividend is rock-solid in good times and bad. Some companies, including
Shell,
were forced to cut their dividends at the height of the pandemic, while Exxon didn’t.
“As we think about going forward and the volatility in the markets and the commodity cycle, you need to make sure that as we think about growth in the dividend, that we also think about sustainability and the ability to deliver on that commitment irrespective of what the market throws at us,” Woods said.
Exxon is likely to raise its dividend again in the 2024 fourth quarter as it did last year, marking the 41st dividend annual increase in a row. The dividend didn’t come up on the company’s Friday earnings call. But it may become a bigger topic as the year goes on.
Write to Avi Salzman at [email protected]
Read the full article here
