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Exxon Mobil


Exxon Mobil is playing catch-up. The oil giant's 21-per-cent increase in its second-quarter payout, announced on Wednesday, is a step in the right direction. But the firm's first-quarter earnings on Thursday, which fell short of analysts' expectations, suggest the move was partly a sop for shareholders.

Exxon, the world's largest publicly traded oil company, is now the largest dividend gusher as well. The new higher dividend puts it on track to shell out $10.7-billion (U.S.) this year, more than any other company, according to Standard & Poor's. Shareholders will welcome the move, since relative to earnings Exxon has not in the past paid out as much as its peers. It has favoured share buybacks instead.

The company handed over 22 per cent of its profit in dividends last year. That lagged the 29 per cent at ConocoPhillips, which analysts expect to be even more bountiful when its refining arm splits off on May 1. Exxon has also often trailed Chevron, which last quarter paid out 31 per cent of its earnings against 24 per cent at Exxon. The dividend boost puts Exxon on track to match Chevron's anticipated payout of around 27 per cent of profit for 2012.

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Exxon also seems to be rationalizing its share buybacks. These have sometimes been poorly timed. Purchases peaked in 2008 along with the company's share price and then plunged in 2010 when Exxon's stock price was languishing. The recent move toward steadier buybacks, around $5-billion-worth a quarter, at least reduces the risk of getting it that badly wrong.

There are less promising signs for investors, though. As the largest natural gas producer in the United States, Exxon has been suffering from the lowest domestic gas prices in a decade. Unfortunately, U.S. gas was also the only part of the company's production that increased in the first quarter from a year earlier. A 5-per-cent overall decline in global oil and gas production is a reminder that it's tough for a huge oil company just to make up for declining output from older wells.

That challenge was rammed home by a 13-per-cent year-on-year rise in spending on finding and extracting new oil and gas. Investors might not be satisfied with Exxon's latest dividend boost for long.

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