All It Takes Is $3,000 in ExxonMobil to Generate Hundreds in Annual Passive Income

ExxonMobil (NYSE: XOM) 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.

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:

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.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.