Oil stocks took it on the chin over the past two years. The steep decline in commodity prices caused a great deal of pain throughout the energy sector.
Two of the biggest of Big Oil, Exxon Mobil (XOM) and Chevron (CVX), held up relatively well.
While many oil and gas stocks cut their dividend payouts to stay afloat, Exxon Mobil and Chevron continued to raise their dividends through the downturn.
Both Exxon Mobil and Chevron are Dividend Aristocrats. The Dividend Aristocrats are a group of 51 companies in the S&P 500 Index that have raised their dividends for 25+ years in a row.
Exxon Mobil has increased its dividend for 34 consecutive years, while Chevron has raised its dividend for 29 years in a row.
If an investor were interested in buying just one of these two dividend oil stocks, this article will discuss which is the better stock.
Business Overview
Winner: Toss-Up
Operationally, Exxon Mobil and Chevron are very similar. They are both integrated oil and gas companies, meaning they possess the upstream and downstream segments under one roof.
Upstream, which refers to exploration, discovery, and production of oil and gas, was the hardest-hit area by the collapse in commodity prices.
This is because upstream activities rely on the price of the underlying commodity for profitability.
Exxon Mobil’s upstream business lost $4.2 billion in 2016. This was due in large part to a $2 billion reserve impairment charge.
Source: 4Q Earnings Presentation, page 21
Chevron fared a bit better; its upstream business lost ‘just’ $2.5 billion last year.
In addition, Exxon Mobil and Chevron have large downstream businesses, which includes refining.
Oil refining actually benefited from volatility in oil prices, because it widened refinery profit margins by lowering input costs.
Refining profits helped the integrated majors fare much better than independent upstream companies in 2015 and 2016.
Leave A Comment