Many oil and gas companies have been struggling in 2020 as the pandemic's hurt the demand for oil. But one company that hasn't resorted to cutting its dividend thus far is Exxon Mobil (NYSE:XOM).
Currently, the company's paying a quarterly dividend of $0.87, which pays $3.48 per share every year and yields 10.7% annually. It's an incredible yield that on a $25,000 investment would generate more than $2,600 in annual dividends.
However, the problem with many stocks that provide investors with such high payouts is that they're often not sustainable. However, the company released its most recent earnings report on Oct. 30 where its CEO Darren W. Woods stated that "We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend."
The positive for dividend investors is that as challenging a year as it's been for Exxon, the company's still generating positive cash flow. In the third quarter, Exxon generated $4.4 billion in cash flow during the period.
It's also planning for more cost reductions in 2021 in order to strengthen operations. Its third-quarter loss of $680 million was also a significant improvement from the second quarter where Exxon incurred a loss of $1.1 billion.
However, with the coronavirus pandemic in what looks to be a third wave in the U.S., the threat of more shutdowns looms, which could lead to more challenging periods ahead for Exxon.
While the business looked to be improving in Q3, investors should be very careful with this stock as the worst may not be over just yet, and a cut to the dividend may prove to be inevitable.
