BREAKINGVIEWS-Exxon playing catch-up with dividend hike

Exxon Mobil is playing catch-up. The oil giant's 21 percent increase in its second-quarter payout, announced on Wednesday, is a step in the right direction. But the firm's first-quarter earnings on Thursday, which fell short of analysts' expectations, suggest the move was partly a sop for shareholders.
Exxon, the world's largest publicly traded oil company, is now the largest dividend gusher as well. The new higher dividend puts it on track to shell out $10.7 billion this year, more than any other company, according to Standard & Poor's. Shareholders will welcome the move, since relative to earnings Exxon has not in the past paid out as much as peers. It has favored share buybacks instead. 
The company handed over 22 percent of its profit in dividends last year. That lagged the 29 percent at ConocoPhillips, which analysts expect to be even more bountiful when its refining arm splits off on May 1. Exxon has also often trailed Chevron, which last quarter paid out 31 percent of its earnings against 24 percent at Exxon. The dividend boost puts Exxon on track to match Chevron's anticipated payout of around 27 percent of profit for 2012. 
Exxon also seems to be rationalizing its share buybacks. These have sometimes been poorly timed. Purchases peaked in 2008 along with the company's share price and then plunged in 2010 when Exxon's stock price was languishing. The recent move toward steadier buybacks, around $5 billion-worth a quarter, at least reduces the risk of getting it that badly wrong. 
There are less promising signs for investors, though. As the largest natural gas producer in the United States, Exxon has been suffering from the lowest domestic gas prices in a decade. Unfortunately, U.S. gas was also the only part of the company's production that increased in the first quarter from a year earlier. A 5 percent overall decline in global oil and gas production is a reminder that it's tough for a huge oil company just to make up for declining output from older wells. 
That challenge was rammed home by a 13 percent year-on-year rise in spending on finding and extracting new oil and gas. Investors might not be satisfied with Exxon's latest dividend boost for long. 

CONTEXT NEWS
Exxon Mobil, the world's largest publicly traded oil company, on April 26 posted a lower first-quarter profit than analysts expected. Net profit slipped to $9.5 billion, or $2 per share, from $10.65 billion, or $2.14 per share, in the same period a year ago. Analysts had forecast earnings of $2.09 per share, according to Thomson Reuters I/B/E/S. 
On April 25, Exxon declared a second-quarter dividend of 57 cents a share, an increase of 21 percent over the first-quarter payout of 47 cents. 
Exxon's total oil and gas production fell more than 5 percent in the first quarter from a year earlier to 4.55 million barrels of oil equivalent per day, largely due to declines outside the United States. 
Reuters: Exxon Mobil profit falls as output slips

--- Christopher Swann, Reuters Breakingviews columnist.
--- The opinions expressed are his own.