Prediction: ExxonMobil Raises Its Dividend More Than Wall Street Expects

Dividends are great, but what's even better for long-term investors is knowing that they're holding shares of a company that's a true dividend stock, not just a stock that pays a dividend.

Companies become true dividend names by showing unwavering commitment to steadily increasing their payouts. One of the world's largest oil companies, ExxonMobil (NYSE: XOM), is certainly in that camp. ExxonMobil is on a 43-year run of increasing its payout. Those are increases shareholders can set their clocks by, and for those wondering, pencil in the energy stock's next dividend lift. It's likely to arrive in October, as it has over the past several years.

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Each of the company's 2023 through 2025 increases was $0.04 per share quarterly. That's not much, but those boosts add up over time. That consistency may have some on Wall Street banking on another increase of $0.03 to $0.04 a share, but ExxonMobil can deliver an "October surprise" -- and a positive one at that.

ExxonMobil can enhance dividend excellence

In addition to the 43-year payout increase streak, ExxonMobil is the second-largest dividend payer in the S&P 500. Fortunately, a yield of 2.5% and a payout ratio of 52.5% imply two pivotal factors. First, the energy company isn't burdened by its dividend obligations. Second, there's room for payout growth.

How much growth? That's the $64,000 question, but there are credible reasons ExxonMobil could deliver a larger-than-expected dividend increase later this year. As the company noted last December, it was on pace to buy back $20 billion of its shares in 2025 and expected to maintain a similar cadence this year. Retire $40 billion worth of stock over two years, and any company's dividend tab will decline, making it easier to juice payouts to the upside.

ExxonMobil's status as an oil dividend stock royalty is further supported by cold, hard cash. Under its 2030 plan, the oil behemoth raised its 2024 to 2030 earnings and cash flow growth targets to $25 billion and $35 billion, respectively.

Perhaps shortening the odds of a dividend surprise is ExxonMobil's expectation of $145 billion in "surplus cash flow" through 2030. That's based on $65-per-barrel Brent crude prices. Brent closed at nearly $89 on Aug. 20. If that oil contract remains elevated into the fourth quarter, it's possible (not promised) that ExxonMobil could put a little something extra in dividend investors' Halloween goody bags (the dividend increase is often announced around that holiday).

Competitive considerations

Corporations are always competing with each other, but the competition isn't limited to business and generating sales. It extends to captivating investors' attention and their dollars. This is particularly true with dividend investors, and ExxonMobil likely knows as much.

These days, there's plenty of competition. Bond yields are high, and a slew of energy companies sport dividend yields well beyond ExxonMobil's 2.5%. Some of those companies boost payouts several times a year.

So while ExxonMobil's yield is more than double that of the S&P 500, that's not saying much, and the energy company may not want to rest on those "laurels." Amid stiff competition for dividend investors' capital, it might be prudent for ExxonMobil to go the extra mile with its next payout increase.

Todd Shriber 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.