In this news, we discuss the Exxon Mobil to keep dividend flat for first time since 1982.
HOUSTON (Reuters) – Exxon Mobil Corp XOM.N on Wednesday kept its fourth-quarter dividend at 87 cents per share, signaling that 2020 will be the first year since 1982 that the U.S. oil producer has not increased its payout to shareholders.
America’s largest oil producer by volume has been caught off guard by the sharp decline in energy prices and demand this year. US prices have fallen 39% year-to-date and global demand has plummeted due to the COVID-19 pandemic.
Exxon has promised cost and job cuts that could be announced as early as Friday. The decision to keep the quarterly dividend could indicate that it expects margin improvements resulting from the cost reduction to allow it to continue to make the large payment.
At $ 3.48 per share, the annual dividend is equal to 10.6% of its share price.
The company posted its first consecutive quarterly losses this year and is expected to report a full-year loss of $ 2 billion, according to Refinitiv’s estimates, excluding asset sales or write-downs. It publishes the financial results for the third quarter on Friday.
Exxon has a “narrow track” to maintain the dividend without borrowing more, Raymond analyst James Pavel Molchanov said. Even with U.S. oil prices trading around $ 45 a barrel, the dividend would deplete the company’s cash balance by the end of 2021, he said.
BP PLC BP.L, Equinor ASA EQNR.OL and Royal Dutch Shell PLC RDSa.L at the start of the year reduced their shareholders’ payments by at least half.
Four years ago, Exxon stopped buying back its own shares, placing greater emphasis on the dividend, which reached $ 14.7 billion last year. Officials said in July that they were committed to maintaining the dividend.
“We doubt the sanctity of the long-term dividend,” said Jennifer Rowland, analyst at Edward Jones. “The potential for dividend reduction in 2021 is greater if demand does not fully recover.”
Exxon shares traded at $ 31.57 on Wednesday, down 3.8%, and the lowest level in more than two decades. The dividend announcement took place after the market closed.
Reporting by Jennifer Hiller; Editing by Himani Sarkar and Christopher Cushing
Original © Thomson Reuters
Originally posted 2020-10-28 17:36:10.