Exxon Mobil's shares have recently rallied, resulting in a dividend yield of 2.7%, the lowest since 2014, and only slightly higher than the yield offered by Match Group. This decline in yield is significant as Exxon's dividend has historically attracted retail investors.
For those holding Exxon shares primarily for income, a strategy called a "buy-write with a twist" or covered call spread is recommended. This approach allows investors to earn premium income while still having the potential for capital appreciation, which is crucial given Exxon's current strong fundamentals and technical performance.
The company is benefiting from a favorable market environment and disciplined capital management, leading to robust energy demand and high-margin production that has resulted in strong free cash flow. Analysts have recently revised their earnings estimates upward, reflecting confidence in Exxon's operational efficiency.
The stock is trading above its rising long-term moving average, indicating strong institutional support. The suggested strategy involves holding 100 shares of Exxon, selling a June 26th $165 call for a premium of $2.20, and buying a June 26th $170 call for $0.90, resulting in a net credit of approximately $1.30 per share.
This strategy not only provides a yield of about 0.8–1.0% over six weeks but also allows for participation in any significant price increases beyond $170, thus preserving upside potential that a traditional covered call would limit. This approach aligns well with Exxon's current momentum, offering immediate income while keeping the possibility of substantial gains open