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Normally I look for dividend yields above 4% or 5% for my dividend income portfolio.

On this measure, Exxon Mobil (XOM) with its 3.35% yield isn’t exactly an astounding opportunity.

But something out of a recent report from Goldman Sachs caught my eye: Exxon Mobile (XOM) will be “the only U.S. or European major that can generate sufficient free cash flow to cover its dividend near $60 a barrel in 2016-17.” While other oil majors, Goldman continues, will be struggling to keep the dividend flat, Exxon Mobil will be in a position to increase the dividend for the next several years.

Goldman is, at the moment, extremely bearish on oil prices, lowering its forecast in the last few days to an average in 2015 of $58 a barrel for Brent and $52 for West Texas Intermediate. (Brent closed at $66.54 a barrel today, May 21, while West Texas Intermediate closed at $60.72 a barrel.) But while you probably think (as I do) that Goldman’s forecast is too pessimistic, I would make the point that oil prices could well stay at $70 or less for a while. And in that environment, oil companies aren’t going to be awash in cash for distribution to shareholders as dividends or buybacks.

Except for Exxon Mobil.

Standard & Poor’s has recently made the same point. “We see 2016 operating cash flow well in excess of capital spending, raising flexibility for returns to shareholders.”

And so has Morningstar: We “continue to see the dividend as the safest of all of the
oil majors” with a significant step up in free cash flow by 2018

A decent yield now, a safe yield going forward, and the prospects of continued dividend growth even during this period of depressed oil prices. (Exxon Mobil has grown its dividend at a 10.5% annual rate over the last five years.) Sounds like a good deal for income investors to me. I’ll be adding ExxonMobil to my dividend income portfolio tomorrow May 22. The shares closed at $87.21 today, May 21. The 52-week high/low range is $104.76 to $82.68 a share. (Exxon Mobil is already a member of my Jubak’s 50 long-term stock portfolio.)

So where does all this cash flow come from?

Partly it’s a result of Exxon Mobil winding down the capital spending stage on seven big projects that will go on line this year. (That is they will shift from eating cash to producing it.) And partly it’s a reflection of Exxon Mobil’s downstream strength. The company’s profit from its refineries doubled year over year in the first quarter. Low oil prices certainly hurt profits in the company’s up stream production business but they push up profits as refineries can buy crude at bargain prices. Despite distributing $3.9 billion to shareholders in the first quarter, Exxon Mobil’s cash position grew by $500 million in the period.

Of course, if Goldman is wrong and oil prices finish stronger in 2015 than projected, Exxon Mobil (and dividend investors) ought to do okay too.