Chevron and Exxon Just Had a Windfall Quarter. Their Dividends Grew About 4%

DGTR Article 5: both dividends can ride out a bad oil year, neither grows fast enough for my 6.5% target, and only one trades near my return hurdle.

On October 30, ExxonMobil (XOM) reported $17.5 billion of adjusted third-quarter earnings and raised its quarterly dividend to $1.07, its 44th straight year of increases. Chevron (CVX) reported $10.4 billion the same morning. Both closed at record highs.

Six sessions later Exxon was 12% lower and Chevron about 10% lower. Brent had fallen 16% in a week on Iran peace talks.

One easy read says sell before oil falls further. The other says buy the dip and lock in a higher yield. I don't trust either.

Once oil stops paying for it, can either dividend grow fast enough to matter?

That question decides whether a stock earns new money in my dividend sleeve and it's a harder one than "is the dividend safe," which both companies pass easily. Growth is where they separate and price pulls them further apart.

Here is where I land on the November 9 close. Operating cash after capital spending covered each dividend about 2.4 to 2.5 times in the year through September. My planning estimate of sustainable dividend growth is near 5.9% at Chevron and 4.6% to 4.8% at Exxon, depending on how you measure Exxon's dividend history. Both sit below the 6.5% income-growth objective I set in Article One.

On price, my central cash-flow model implies roughly 8.1% a year from Chevron and 6.7% from Exxon. My hurdle for new money is 8.5%.

So I'm keeping both and adding to neither.

Safe and growing are different promises

The last oil collapse shows why.

In 2020 both companies borrowed to keep paying. Chevron's operating cash beat its capital spending by only $1.7 billion while it paid $9.7 billion in dividends. Exxon spent more on property than it brought in from operations and still paid $14.9 billion.

Then look at the check itself. Chevron raised its quarterly dividend 8.4% in January 2020 and another 3.9% in January 2021. Exxon held its quarterly payment at 87 cents for ten straight payments, from mid-2019 into late 2021. Its annual-increase streak survived because the yearly totals still edged up, while the check itself sat still for two and a half years.

A dividend can remain intact and stop growing for years. For a sleeve that needs 6.5% income growth, that matters more than the streak count.

Below the line I answer the questions that decide the trade.

How far can oil fall before each dividend stops paying for itself and where does net debt go if a $50 year lasts two? How much of the buyback money since Pioneer and Hess reached shareholders per share? What does $100 in each stock pay over ten years?

What does each November 9 price require, including a run on Exxon's own 2030 plan? Then the action, five dated triggers and the series tracker.