A detailed quantitative analysis by Exxon Mobil Corporation (XOM) is linked here. Below are some highlights from the analysis linked above:
Company description: Exxon Mobil Corp. was founded in late 1999 through the merger of Exxon and Mobil and is the world’s largest state-owned integrated oil company.
Fair value: When calculating the fair value, I take into account the NPV MMA Differential Fair Value together with these four calculations of the fair value, a detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham number
XOM is traded at a discount to 1.) and 3.) above. With the NPV-MMA differential also factored in, the stock trades at a premium of 56.0% to its calculated fair value of $ 36.56. XOM didn’t deserve any stars in this section.
Analytical data on dividends: There are three possible stars and three key metrics in this section, a detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4-year div. > 15%
XOM earned a star for 2.) above in this section. The stock earned a star because its recent debt to total capital was less than 45%. The company has paid a cash dividend to shareholders every year since 1882 and has increased its dividend payments for 0 consecutive years.
Dividend Income vs. MMA: Why take the equity risk and invest in a dividend stock when you could get a better return with a much lower risk money market account (MMA) or a government bond? This section compares the earning power of this stock to a High yield MMA. In this section two points are considered, a detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. Years to> MMA
The NPV MMA Diff. the $ 1,107 is below the $ 3,500 target I’m looking for in a stock that has been raising dividends for as long as XOM. The stock’s current return of 6.1% exceeds the estimated 20-year average MMA rate of 2.74%.
Peers: The company’s peer group includes: BP plc (BP) with a yield of 5.2%, Chevron Corp. (CVX) with a yield of 5.3% and ConocoPhillips (COP) with a yield of 3.1%.
Graduation: XOM received no stars in the “Fair Value” area, one star in the “Dividend Analysis Data” area and no stars in the “Dividend Income vs. MMA” area, for a total of one star. This ranks XOM quantitatively as a 1 star very weak Share.
Using my D4L-PreScreen.xls Model, I found that the stock price would have to drop to $ 34.74 before XOM’s NPV-MMA differential drops to the minimum of $ 3,500 that I’m looking for on a stock with 0 years of consecutive dividend increases. At that price, the stock would return 10.0%.
Resetting the D4L-PreScreen.xls The model and solution for the dividend growth rate required to achieve the target NPV MMA differential of $ 500, the calculated rate is 5.1%. This dividend growth rate is above the 0.0% used in this analysis and therefore does not offer a margin of safety. XOM has one Risk rating of 2.5, which classifies it as a high risk stock.
With a relentless pursuit of efficiency through technology and operational improvement, XOM stands out from other super majors and has achieved higher ROI. XOM has enjoyed formidable earnings and dividend growth and stability over the years, but is now struggling in this era of lower consumption. The stock trades above my calculated fair value of $ 36.56 and has poor dividend metrics, including its free cash flow payout of 379% (up from 584%). I am not going to buy at this point having recently sold my XOM position.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. This is generally never true. Before buying or selling stocks they you should do your own research and come to your own conclusions. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I was not holding a position in XOM (0.0% of my dividend growth portfolio) and was long on CVX.
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