ExxonMobil Has Raised Its Dividend 43 Years in a Row. But the Raises Used to Be Bigger.

Sometime in the next couple of months, ExxonMobil (NYSE:XOM) will almost certainly raise its dividend for a 44th consecutive year. The oil giant announces its increase alongside third-quarter results, in late October or early November, and the streak is one of the longest any dividend stock can claim.

That streak is why ExxonMobil shows up on so many lists of top stocks to buy and hold for income. What the headline number doesn't say is what the raises have looked like lately.

The current quarterly payout is $1.03 per share, or $4.12 per year, which works out to a dividend yield of about 2.5% at the stock's price of about $163 as of this writing. And the recent increases that built it have been modest: about 4% per year, four years running.

It wasn't always this way. So before counting on the next raise, I think it's worth looking at what the streak actually pays now, and why the raises shrank.

Image source: Getty Images.

Four raises, 17% total

ExxonMobil lifted its quarterly dividend from $0.88 to $0.91 in October 2022, a 3.4% increase. Then came $0.95 in 2023, $0.99 in 2024, and $1.03 last October -- raises of 4.4%, 4.2%, and 4%, respectively.

Add up all four raises, and the payout has grown about 17% in total.

For contrast, in 2012 the company raised its dividend 21% in a single announcement, taking the quarterly payout from $0.47 to $0.57. One raise back then moved the payout by a bigger percentage than the last four combined have.

The leanest stretch sits between those eras. ExxonMobil held its quarterly payout at $0.87 for 10 straight quarters, from mid-2019 until late 2021, as the pandemic crushed oil prices. The calendar-year total still inched higher anyway, because the last raise before the freeze took effect partway through 2019. That timing technicality kept the streak alive -- but just barely.

Why so small?

The small raises are not about affordability. The company could afford much bigger ones.

ExxonMobil's second-quarter net income came to $14.5 billion, or $3.48 per share, about double the $7.1 billion it earned in the year-ago quarter.

Cash flow from operations was $23.6 billion, and free cash flow was $17.2 billion.

The quarter's dividend cost about $4.3 billion, part of $9.4 billion in total shareholder distributions. In other words, free cash flow covered the payout about four times over. That is coverage most dividend payers can only envy.

The money the dividend doesn't take is going somewhere else. ExxonMobil spent $5.1 billion on share repurchases in the second quarter, consistent with a buyback program running at a $20 billion annual pace -- more than the roughly $17 billion a year the dividend costs. And the company keeps investing heavily in growth, putting $13 billion of cash capital expenditures to work in this year's first half alone, with record Permian Basin production and a fifth production vessel now in Guyana.

That mix is a choice, and the frozen-payout stretch explains it. Oil's 2020 collapse turned the dividend into a strain, and the quarterly rate went nowhere for two and a half years while management protected it. The lesson stuck.

Capital returns were rebuilt around a dividend sized to survive any oil price, with buybacks absorbing the boom-time cash instead. After all, buybacks can be dialed back in a bad year without breaking anything. A dividend raise is a commitment that never expires.

What the streak buys now

There's a defensible logic to all of it, and the payout is arguably safer today than it has been in decades. Coverage is thick, the balance sheet carries little net debt for a company this size, and the raise pace no longer depends on oil prices cooperating.

But investors buying the stock for the streak should see it for what it now is. The 43 years describe durability, not growth. At about 2.5%, the yield is ordinary, and at about 4% per year, the raises roughly track inflation rather than outrunning it. A shareholder's income check grows -- slowly.

Could October bring an upside surprise? The cash is certainly there, and this year's earnings environment has been strong. But four straight years of about 4% raises look less like a constraint and more like a policy, and policies at companies this size don't change casually.

Ultimately, ExxonMobil's dividend record is intact and well-funded. It is also growing more slowly than it once did. Sure, I think the streak deserves its reputation. The size of the raises is another matter.

Daniel Sparks and his clients do not have positions 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.