Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), ConocoPhillips (COP), and Royal Dutch Shell plc (ADR) (RDS.B): Not All Oil Dividends Are Created Equal

There are many publicly traded, mega-cap energy stocks for investors to choose from. We’ve all likely encountered each of these companies in our daily lives and might assume they’re one and the same.

However, while the integrated oil majors might seem like nearly identical companies with extremely similar businesses, their shareholder practices are quite different. As a result, investors need to determine exactly what they value most from their stocks before jumping in to the sector.

Similar businesses, differing shareholder policies

Investors are likely well-accustomed to the big players within the energy sector. Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Royal Dutch Shell plc (ADR) (NYSE:RDS.B) are some of the most well-known in the industry, each with huge market capitalizations that are relied upon for steady profits and consistent dividend payments to shareholders.

Clearly, Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Royal Dutch Shell plc (ADR) (NYSE:RDS.B) all have similar operations. Investors interested in gaining access to energy dividend-payers might be tempted to simply throw a dart and pick one out of the sector to invest in. However, that would be short sighted. In fact, there are stark differences in how each company distributes its earnings to shareholders.

Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) are the two lowest-yielding of these oil majors, with dividend yields of 2.8% and 3.2%, respectively. While these are certainly reasonable yields that compare favorably to the roughly 2% yield available on the broader market, income investors who focus on current yield can find bigger dividends in the space.

For example, ConocoPhillips (NYSE:COP) and Royal Dutch Shell plc (ADR) (NYSE:RDS.B) are much more aggressive in how much cash flow they distribute to their shareholders. The two oil majors currently yield 4.2% and 5.3%, respectively, several hundred basis points better than the yield on both the S&P 500 as well as their Big Oil competitors.

Income now, or income later

Of course, there’s often a cost to abnormally high dividend yields, which is lower dividend growth over time. It stands to reason that companies that pay out a significantly higher percentage of earnings as dividends often can’t afford to raise their payouts as much, and in the case of these oil companies, that holds true.