Shares of Exxon Mobil Corp. fell 1.0% in morning trade Thursday, putting them on course for a fifth-straight loss to an 8-week low, after RBC Capital cut its stock price target on concerns over the potential for future share buybacks. Analyst Biraj Borkhataria, who rates Exxon Mobil sector perform, lowered his price target to $85, which is just 5.5% above current levels, from $90. Borkhataria said recent conversations with investors indicate many favor the stock given its relatively high dividend yield, but Borkhataria believes that argument fails to recognize that share buybacks have been a core part of shareholder returns in the past, and that’s not likely to see much growth. “We see limited scope for Exxon to raise the share buyback program materially going forward, with surplus cash likely to be utilized in asset acquisitions,” Borkhataria wrote in a note to clients. “On an all-in basis, we see Exxon trading in line with the market, and thus materially less attractive than in prior years.” At current share prices, Exxon’s dividend yield of 3.83% is above the implied yield of the SPDR Energy Select Sector ETF of 3.19% and of the S&P 500 implied yield of 1.94%. Exxon Mobil’s yield puts it in the 92nd-percentile of S&P 500 components. The stock has slid 10.9% year to date, while the Energy ETF has lost 11.0% and the S&P 500 has gained 15.1%.
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