**Exxon Mobil Corp.** (NYSE:** XOM**) is not going to lower its dividend no matter what it costs the company. That point came out loud and clear from the company’s latest earnings conference call. This means that XOM stock will continue to have a “strong” dividend yield of about 6.15%. It’s worth at least 32% more, or $74.63 per share, based on its historical dividend yield.

For the past two years (8 quarters) Exxon has paid 87 cents per share in quarterly dividends. That works out to $3.48 per share each year. Exxon clearly intends to maintain that dividend. Therefore, at today’s price (April 9) of $55.87, the dividend yield is very healthy at 6.2%.

### Target Price Based on Historicals

Moreover, based on the company’s historical dividend yield, this is much higher than its average. For example, *Morningstar* reports that over the past 5 years, its trailing 5-year dividend *yield* has been 4.96% (almost 5%).

We can use this to estimate the normalized target value for XOM stock. For example, if we divide the dividend per share of $3.48 by the average yield of 4.96%, the result is a target price of $70.16 per share. This represents a potential gain of $14.29 or about 26% more based on today’s price of $55.87.

We can do the same thing with the company’s earnings-per-share (EPS). Applying *Morningstar’s* 5-year avg. price-to-earnings (P/E) ratio of 25.62 times (over the last 5 years) to Exxon’s EPS for this year ($2.87) produces a target price of $73.53. That is over 30% above today’s price. Similarly using the Morningstar forward P/E average of 21.75 times Exxon’s $3.88 EPS for 2022 produces a target price of $84.39.

Now we have three different price targets based on dividend yield and price-to-earnings. To round things out we can also derive a price based on its historical price-to-sales. *Morningstar* says this is 1.25 times over the last five years. Analysts predict sales of $245.5 billion for 2021, so the price target works out to $306.875 billion. This is 29.7% above Exxon’s existing market cap of $236.5 billion. In other words, XOM stock is worth nearly 30% more or $72.46 per share.

That means that, on average, XOM stock is worth about 34% higher, or $75.14 per share.

These ratios are based on earnings and sales estimates provided by *Seeking Alpha* on their Earnings tab for Exxon Mobil stock. The estimates can vary depending on which aggregation service is used. But this gives you an idea that XOM stock is undervalued based on its historical metrics.

One thing to note is that although the $3.48 dividend exceeds the forecast earnings of $2.87 this year (2021). But next year analysts predict EPS of $3.88 per share, which will cover the dividend, assuming oil and gas prices stay high.

Moreover, management said on the fourth-quarter 2020 conference call that cash flow from operations should cover the dividend payments this year. This coincides with their intention to maintain a “strong” dividend, mentioned 10 times on the conference call.

### What To Do With XOM Stock

Most analysts have higher price targets for Exxon stock, but not by much. For example, *TipRanks.com* says that 18 analysts have an average price target of just $60.68.

Similarly, *Yahoo! Finance* says that 25 analysts believe on average XOM stock is worth $61.18.

However, *Marketbeat.com* reports that 24 analysts have a lower target of $52.73, whereas *Seeking Alpha* says that 27 analysts have an average target of $61.36.

You can see in the table on the right that the median analyst price target is $60.63, or 7.1% above today’s price. So, on the one hand, this is much lower than my price target using historical metrics.

But on the other hand, keep in mind that my price target could take several years to achieve, whereas most analysts are just looking out one year. For example, if my 34% higher price target takes two years, the average annual return will be just 16% each year on a compounded basis.

Moreover, the dividend yield is 6.15%. Therefore the total return, even if the analysts’ target price pans out will be 13.25% (i.e., 7.1% price gain plus 6.15% dividend yield). My target price produces an expected return of 21.95% (i.e., 14.8% gain plus 6.15% yield).

Any way that you look at it, XOM stock looks like a good bargain here, assuming oil stays high and the stock returns to its normal historical value metrics.

*On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.*

*Mark Hake writes about personal finance on **mrhake.medium.com** and runs the **Total Yield Value Guide**which you can review **here**.*