There has been much prognostication on the Exxon Mobil (XOM) dividend both here at Seeking Alpha and within the financial press. All that spilled ink is no surprise given the dividend yield has crossed into double digits, long heralded as a sign that at the payout as unsustainable – or at least according to market consensus. Why so much interest? Correctly calling a dividend cut on what still is a cornerstone income position for many retirees would certainly win any analyst or financial blogger some internet brownie points. Nearly all do not have the conviction to put capital at risk on that call by being short.

As something of a dividend cut soothsayer myself – Vermilion Energy (VET) and Occidental Petroleum (OXY) were two public energy bearish calls this year from me that explicitly called prior fat payouts unsustainable – I’d relish in the opportunity to make that call here. Problem is, I don’t think you can. While bulls certainly have had blinders on when it comes to both operational problems at Exxon Mobil as well as the relative valuation compared to direct comps, to me it seems like the bears are well ahead of themselves in forecasting a cut.

Why Dividends Get Cut

For any analyst or independent investor to make accurate (and timely) dividend cut calls, there are two (very) simple catalysts that have to be watched out for. This is quite broad brush, but readers will find that Exxon Mobil does not really check any of these boxes.

Before we get started here, yes Exxon Mobil has burned through quite a bit of cash this year. My working model for the supermajor calls for about $17.0B in operational cash flow (inclusive of a working capital hit) in 2020 against $19.2B in capital expenditures and $14.8B in dividends.