Oil prices have fallen more than 20% in the past couple of months, but it appeared that dividend-seeking investors preferred integrated oil giant ExxonMobil over ConocoPhillips.
Why?
There may be a few reasons. First, Exxon offers them a more diversified yet balanced portfolio. Exxon is one of the largest and most conservative but highly integrated energy companies in the world. Being integrated, Exxon's business spans from the upstream drilling space to the downstream refining and chemicals sector. With exposure to both the upstream and downstream segments, the company has been able to successfully mitigate a number of risks. Oil is a key input on the chemical and refining side, meaning low oil prices are a benefit to this piece of Exxon's operation.
Second, it’s true that oil prices dictate the top and bottom lines for Exxon. But the benefit of low oil prices derived from the downstream portion business has helped soften the blow of energy downturns. A presence across the value chain also should enable Exxon to bounce back at a faster rate compared to its peers when tides turn in favor of the industry.
Third, Exxon's conservative approach has helped the company keep it’s external borrowings less than 10% in the overall capital structure. Long-term focus and a resilient business strategy has helped the oil giant successfully mitigate oil price volatility.
This is how Exxon has managed to increase its dividend for 36 consecutive years, including through the deep oil downturn starting mid-2014, a feat even its peers appreciate.