3 High Yield Dividend Aristocrats For Income Now

1. Exxon Mobil Corporation (NYSE:XOM)

Exxon Mobil Corporation (NYSE:XOM) is a leading oil and gas supermajor. It owns strong low-cost production assets, e.g. in the Permian Basin and Guyana. That allows Exxon Mobil to be free cash flow positive in an environment where oil prices are relatively low. In the current environment, with oil prices at an elevated level, XOM is highly profitable and generates very strong free cash flows.

The company shares these cash flows with its owners by paying a dividend that currently yields 3.7%. Exxon Mobil has raised its dividend for several decades in a row, which is a strong feat for a company in this industry that can be cyclical. Exxon Mobil’s dividend payout ratio, based on earnings-per-share forecasts for the current year, is pretty low, at just 28%. This should allow Exxon Mobil to increase its dividend meaningfully over the next couple of years, even if profits were to pull back to some degree.

But due to tight oil markets and the recent OPEC decision to cut production, oil prices could remain at elevated levels for the foreseeable future and might even climb further, leading to even higher profits for Exxon Mobil in that scenario. This, in turn, could allow for increased shareholder returns, even faster balance sheet deleveraging, or could position Exxon Mobil for large-scale M&A in case the company finds attractive targets to pursue.

XOM trades at 7.5x this year’s expected net profit, which is a very inexpensive valuation. Exxon Mobil takes advantage of that by buying back shares under its current $30 billion repurchase authorization, which should lower the share count meaningfully over time, thereby making the dividend even more secure as dividends have to be paid to a lower number of shareholders.

You can also take a look at 10 Healthcare Dividend Stocks with Over 3% Yield and 11 Best Dividend Stocks Under $50.

Follow Insider Monkey on Twitter