Not long after John D Rockerfeller formed Standard Oil it became the largest energy company in the world and the US. Standard Oil was so big and powerful, Congress broke in up and eventually Exxon became number one energy company. Throughout its existence, Exxon has been the number one energy company, but COVID happened and demand for gasoline dropped which has resulted in Exxon no long being the number one energy company. Who is first? NextEra Energy the world’s largest producer of wind and solar energy. Exxon and Chevron bounce between 2nd and 3rd largest.
In an article by Jennifer Hiller of Reuters, Exxon will be cutting 14,000 jobs because of weak demand but the dividend which is yielding near 10% due to the 50% drop in the price of the shares is questionable. If you own an energy stock, it likely was Exxon but if oil remains below $45 a barrel, Exxon will loses its cash balance. To maintain the dividend, it might have to sell assets.
Darren Woods spent heavily to boost output and turn around sagging profits by buying land in the US share oilfields, global refining, plastics and offshore Guyana where it struck one of the biggest discoveries in a decade.
In 2020, Exxon has cut spending plans by $10 billion to $23 billion as debt has risen 60% since 2017.
Linking to dividend paying stocks for all its existence Exxon has been a great stock to hold and collect a dividend. The total return had been wonderful and it looked like it was going to last forever or as long as we had internal combustion engine vehicles. Something changed rapidly and commodity prices went lower, it was a double whammy. In 2021, we expect the economy will have shaken the COVID but would you wait or find an alternative. With dividend stocks, it often takes multiples changes before you need to find alternatives, but it is good to know them just in case.
There are more questions than answers, till the next time – to raising questions.