

Revenues for these two companies increased at a respectful pace during the years 2009 thru 2011 but as the world economy slowed so did their revenues (See table below). Based on this information revenues for both companies slowed in 2012 and estimates show that revenue will not have recovered in 2014 from the revenue fall off in 2012.
ExxonMobil Corp $438.280 $447.670 $482.295 $486.429 $383.221 $310.586 | Revenues (Billions) 2014 Est. 2013 Est. 2012 2011 2010 2009 | Chevron Corp $242.170 $237.190 $230.590 $244.371 $198.198 $167.402 |
Earnings
Earnings for ExxonMobil Corp during the period from 2009 to 2012 increased at an annual rate of growth of 34.17%. While this is impressive, earnings only increased by 15.20% from 2011 to 2012. Earnings for Chevron Corp during the period from 2009 to 2012 increased at an annual rate of growth of 36.05% but actually declined slightly from 2001 to 2012. Based on estimates for 2013 it doesn't appear that earnings are improving for this year either.
ExxonMobil Corp $5.46 (9 Months) $9.70 $8.42 $6.22 $3.98 | Earnings 2013 2012 2011 2010 2009 | Chevron Corp $8.52 (9 Months) $13.32 $13.48 $9.48 $5.24 |
Dividends, Dividend Growth Rates, and Payout Ratios
Dividends, however, have continued to climb during this same period but at a much slower rate than the increases in earnings. While earnings for these companies were growing in the range of approximately 34-36%, dividends were only growing in the range of 9-12%. As a result of this differential, the payout ratio for ExxonMobil has declined from 41.71% in 2009 to 22.47% in 2012 and for Chevron from 50.76% in 2009 to 26.35% in 2012. This would normally be great news since it would lead the average investor to believe that since the earnings were improving faster than dividends, future dividend increases would eventually follow as the payout ratio is driven toward zero. But knowing that earnings were not expected to increase in the future as fast as they have in the past, it would be expected that the payout ratio would start to increase once again and put pressure on both of these companies to significantly decrease the rate of dividend growth. This would definitely be bad news.
ExxonMobil Corp $2.46 $2.18 $1.85 $1.74 $1.66 $1.55 $.98 | Dividends 2013 Dividend 2012 Dividend 2011 Dividend 2010 Dividend 2009 Dividend 2008 Dividend 2003 Dividend | Chevron Corp $3.90 $3.51 $3.09 $2.84 $2.66 $2.53 $1.43 |
ExxonMobil Corp 12.10% 9.67% 9.64% | Dividend Growth Rate 3 Year 5 Year 10 Year | Chevron Corp 11.03% 9.04% 10.55% |
ExxonMobil Corp 22.47% 21.97% 27.97% 41.71% | Payout Ratio 2012 2011 2010 2009 | Chevron Corp 26.35% 22.92% 29.95% 50.76% |
Dividend Yields
At the end of 2013 ExxonMobil had a dividend yield of 2.43% which was basically unchanged from 2010. The dividend for Chevron had slightly decreased from 3.42% to 3.12% from 2010 to 2013. Both of these rates are excellent and approximate the threshold of 2.5% I expect from any investment I consider buying into. In fact a small pullback in the price of Exxon Mobil to $98.40 would increase the yield on the stock to 2.5% and is well within the variability of the stock (see charts below).
ExxonMobil Corp $101.20 (2.43%) $70.50 (2.47%) | EOY Stock Price (Div Yield) 2013 2010 | Chevron Corp $124.91 (3.12%) $83.00 (3.42%) |
Stock Price Growth Rates
I've also calculated the three year stock price growth rate for ExxonMobil to be 12.66% and for Chevron is 14.44%. However this growth rate is calculated based upon the closing price of the stock as of 31 December and the approximate closing price on 31 December 2010. Calculations made on prices that can vary every trading day is a dangerous calculation to base any decisions on but it can be quite useful for comparison purposes.
ExxonMobil Corp 12.66% | Stock Price Growth Rate 3 Year | Chevron Corp 14.44% |
The Stock Charts
Below are the three year weekly charts for both ExxonMobil Corporation and Chevron Corporation. These charts include 5 and 10 week moving averages as well as Bollinger Bands. I've also included the RSI, MACD and ADX for supporting confirmation. As always, I use fundamental analysis to filter or screen companies to determine if they meet my criteria for further analysis or investment. I then use technical analysis to determine the appropriate price and/or time to acquire a stock position. In the end, I hope to own the right stock at the right price and then add to that position over time.
Conclusion
Both of these companies would be excellent candidates for consideration for my accounts based on past performance. I like how they both pay approximately 2.5% in dividends and have a consistent dividend growth rate in excess of the inflation rate. I'm also impressed that their revenues and profits have been growing at a rate faster than the general economy. But all this is in hindsight. Unfortunately going forward, revenue and earnings estimates appear to be declining. This can't be good. I honestly don't believe this will affect either company's ability to increase their dividend annually for some time to come, but it will eventually cause the payout ratio to creep higher and put pressure the company's ability to increase future dividend increases. In addition, any slowing of revenues and earnings will eventually impact the price of the stock. Since I count on a combination of the dividend yield and the increase of the stock price to be at least 8% per year and the dividend is in the area of 2.5%, then I need the stock price to increase by 5.5% per year. That will probably not be possible going forward with revenue and earnings estimates in decline.
I intend to take a wait and see on these two stocks to see how any future revenues and earnings materialize. I may, however, begin to accumulate odd lots of each of these companies if the stocks pull back from their present price. I see no hurry to accumulate these stocks at this time and waiting to see if the projected revenue and earnings estimates pan out is probably the prudent position to take at this time. They are, however, two solid companies that have been excellent long term investments for well over 100 years and I expect them to be excellent investments again.