Exxon Mobil May Show Better Dividend Growth Than Chevron

Exxon Mobil Corp. (NYSE: XOM) may be victim of the same oil price crash as Chevron and others, but Exxon may have more wiggle room than Chevron on how much of a token dividend hike it will announce. Exxon also wants to be able to say it has raised dividends endlessly. Exxon Mobil shareholders should still have conservative expectations about how much of the dividend will be hiked.

It seems safe to assume that Exxon will not duplicate the 9.5% payout hike seen in 2014. Its current yield is 3.2%, so it has a long way to go before catching up to rival Chevron. The company’s $2.76 annualized payout compares to $3.79 in earnings per share expected by analysts for 2015, although it did earn $7.36 per share in 2014.

Goldman Sachs recently started Exxon Mobil with a Buy rating, and we even showed that investors were trying to signal the potential start of the stock bottoming out. CEO Rex Tillerson said on March 4: “We remain committed to our investment discipline and maintaining a reliable and growing dividend.” If Exxon does not raise its dividend, then maybe Warren Buffett was right to panic sell his shares.

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Exxon shares were priced recently at $86.26 on a 52-week trading range of $82.68 to $104.76. The stock has a 52-week trading range of $82.68 to $104.76.

Big Blue Can Grow Its Dividend, Even Without Earnings Growth

International Business Machines Corp. (NYSE: IBM) may have no growth and no great story to tell, but it can continue to talk up its earnings power, low valuation, massive share buybacks and history of raising dividends. IBM’s earnings per share growth has been financially engineered by cost cuts and endless share buybacks, but it has managed to raise its dividend payout 16% in 2014. Even after coming clean about not being able to hit the old $20 per share in earnings goal, IBM’s annualized dividend payout of $4.40 compares to a consensus earnings estimate of almost $16 per share for 2015. That is a 28% payout ratio, without considering serious share buybacks, and IBM already yields nearly 2.9%.

IBM has already raised its dividend for 19 consecutive years, and its 2014 dividend hike was its 11th year in a row of double-digit percentage hikes. If IBM wants to maintain the same double-digit hike trend, then the $1.10 per quarter dividend will have to go up to a minimum of $1.21. IBM’s annual shareholder meeting is set for April 28, 2015. Oh, and the company has already telegraphed that it wants to buy back even more stock too.

IBM shares recently traded at $159.80. Its stock has a consensus price target of $158.45 and a 52-week trading range of $149.52 to $199.21. Its highest analyst price target is still up at $198.

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P&G to Reach 60 Years of Dividend Hikes

Procter & Gamble Co. (NYSE: PG) had enough confidence that its dividend hike strategy of almost 60 years was able to continue even through the recession. Having the world’s most dominant consumer products brand name comes with a defensive stock position that is the envy of all rivals and peers. Still, P&G yields 3.1%, it is in the midst of earnings being hurt by a strong dollar, and it is restructuring. Raising the dividend above its earnings growth is simply becoming unrealistic, particularly as it jettisons so many brands ahead.

P&G’s 2014 dividend hike was by 7% and was announced in early April. With so many being sold out of the portfolio, and with potential spin-offs coming, P&G might be able to use an asterisk in the dividend hikes for 2015. With a $2.57 per share annualized payout now, its consensus earnings per share estimates are $4.01 in 2015 and $4.32 in 2016. This leaves additional room with a 64% payout ratio — but it does not leave endless room.

Procter & Gamble was recently trading at $83.75, in a 52-week range of $77.28 to $93.89. The consensus price target is $92.84, and the highest analyst target price is up above $100.

Will Southwest Remain the Airline Dividend King?

Southwest Airlines Co. (NYSE: LUV) was actually the first of the larger airlines to be paying a dividend. After organic growth and after the AirTran acquisition, now Southwest wants to grow internationally. The carrier raised its payout by 50% at the annual meeting in May of 2014, and it accelerated a share buyback plan. After doubling from the 52-week lows, Southwest yields only 0.5%.

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Southwest’s annual payout of $0.24 compares to earnings estimates of $3.52 per share in 2015. Does this mean that the company will double its payout? That sounds aggressive, but we still expect the same 50% or so payout hike. The caveat is that airlines are generally stingy about paying dividends. After all, they have things like terrorism, oil price volatility and recessions wiping out profits entirely to worry about. Still, airline traffic is at a seven-year high.

Shares of Southwest were changing hands recently at $45.74. The consensus price target is $55.69, with the highest analyst price target up at $66, and the 52-week trading range is $22.35 to $47.17.