Is Exxon Mobil a Safe Dividend Stock to Own?

Despite the coronavirus pandemic and challenges the company faced last year, Exxon Mobil (NYSE:XOM) continues to pay investors an attractive dividend.

With quarterly payments of $0.87, the stock is yielding 5.7% annually. On a $20,000 investment, you could expect to earn roughly $1,140 from the stock every year, just through recurring income.

The big concern for investors is that with $19 billion worth of losses over the past four quarters, the company has seen better days. The Dividend Aristocrat has hiked its payouts for decades but it is barely hanging on to that title as it didn't raise its quarterly payments in 2020. Technically its annual dividend payments of $3.48 last year were more than the $3.43 that Exxon paid out in 2019, but not by much. In order for its streak to keep going, Exxon will need to increase its payouts before the year is over.

And while Exxon has generated $3.9 billion of free cash flow in the trailing 12 months, that is nowhere near the nearly $15 billion it paid out in dividends during that time. The good news is that with the economy starting to recover and potentially get back to normal this year, demand for oil could be on the rise and Exxon could bounce back.

For dividend investors, Exxon is a risky stock to own. While its dividend payments are continuing for now at the current rate, that may not be the case a few months from now. There are better options out there for income investors and that's why although Exxon's yield is high, you may be better off investing in lower-yielding stocks that are safer overall.