Exxon’s once-hefty dividend is now tiny. Here’s how to fix that
Oil giant shares with their recent rally ExxonMobil Currently, its return is 2.7%, the lowest since 2014 and just a tick above what Match Group is paying its shareholders.
Exxon’s dividends have been one of the company’s key selling points with investors, especially in the retail sector.
So, what do you do now if you own stocks for income? Back to options.
Exxon currently offers an intriguing example of a “buy-write with a twist,” also known as a covered call spread. This strategy allows investors to collect premium income while preserving the capital appreciation window, a necessary feature when a stock displays fundamental and technical strength currently seen in XOM.
Macro and basic catalyst
Exxon operates at a point where capital discipline and favorable market dynamics prevail. With energy demand projected to remain strong, the company’s focus on high-margin generation has translated into outstanding free cash flow. From a valuation perspective, XOM remains attractive with its low EV/EBITDA multiple.
Additionally, recent upward revisions to earnings estimates suggest analysts appreciate the company’s operational efficiency. Over the past five years, Russell 1000 constituents that combine rising earnings forecasts with high free cash flow returns have delivered significantly better monthly returns, especially when the technical structure is also good… and it is.
Exxon, 1 year
XOM is trading comfortably above its ascending long-term moving average. This price action suggests that dips have been bought and institutional support remains intact.
Strategy: Advanced buy-write
This strategy uses a credit call spread (also known as a “short” call spread) on a long stock position, rather than a standard covered call that limits any upside in the strike price:
- Long: 100 XOM shares
- Sale: June 26 $165 Search (Collect $2.20)
- Purchase: June 26 $170 Search (Pay $0.90)
- Net Credit: ~$1.30 per share
- Skill level: Medium
Why “Twist”?
By selling the $165/$170 vertical against the stock, you get a $1.30 credit and a 0.8-1.0% “return” over the next six weeks. But the long leg at $170 acts as insurance against a major breakout. If XOM rises above $170, the investor shares in all gains above that level, effectively “bordering” the uptrend that a traditional covered call would surrender.
This structure aligns perfectly with XOM’s current momentum; It provides immediate income while leaving the door open for significant upside.
