For dividend and indexing nerds alike, one of the interesting company-specific issues to ponder entering this year was whether or not oil giant Exxon Mobil (NYSE:XOM) would retain its spot in the S&P 500 Dividend Aristocrats Index.
As experienced dividend growth investors know, inclusion in that index is prestigious, and keeping a spot in that benchmark is no small feat because companies must have minimum payout increase streaks of 25 years.
With the Wednesday announcement that its fourth-quarter payout will be a penny higher than what it delivered in the third quarter, Texas-based Exxon remains a dividend aristocrat.
“In 2020, amid the pandemic, weak oil prices, and concerns that it was spending too heavily on growth projects, Exxon Mobil did not increase the common stock dividend, and kept it at 87 cents a share per quarter,” reports Lawrence Strauss for Barron’s. “The company paid out a total of $3.48 a share last year, slightly higher than what it paid in 2019. That allowed it to remain a Dividend Aristocrat.”
Exxon currently yields 5.43% — jaw-dropping by today’s standards. News of its higher dividend enhances the income profiles of an array of exchange traded funds, and with oil prices soaring, the company could stockpile enough cash to ensure another year of payout growth in 2022.
“Through its dividends, the corporation has shared its success with its shareholders for more than 100 years and has increased its annual dividend payment to shareholders for 39 consecutive years,” according to a statement issued by the oil giant.
Obviously, it’s good news that Exxon is keeping the dividend increase streak alive. However, speculation that the company was vulnerable to losing the streak — chatter to that effect has been around since at least last year — is a reminder that investors need to emphasize quality when it comes to dividend investing.
By focusing on companies with strong balance sheets and low debt margins, the SmartETFs Dividend Builder ETF (DIVS) delivers quality dividends to investors, and while integrated oil dividends look sturdy today, previous oil bear markets remind investors that this is not always the case. To that end, conservative investors might like the fact that DIVS currently isn’t allocated to the energy sector.
One more thing: DIVS is actively managed so it can more swiftly dodge or part ways with stocks that could be dividend offenders.
For more news, information, and strategy, visit the Dividend Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.