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Investing.com – Exxon (NYSE:XOM) shares rose 1.5% on Wednesday in premarket trading, setting aside Moody’s (NYSE:MCO) downgrade of the company’s debt rating.
On Tuesday, Moody’s downgraded the debt ratings of Exxon by a notch to Aa2 from Aa1, saying that the company’s policy to maintain its large dividend will slow down its debt-reduction process. The downgrade came as the ratings agency said Exxon’s policy favors shareholders over its bondholders.
The ratings agency assigned a ‘stable’ outlook for Exxon’s Aa2 rating in its second downgrade for the company in almost a year.
“The company is prioritizing debt reduction through capital spending restraint and free cash flow generation going forward, but by maintaining its large dividend the progress will be slow and subject to the uncertainties regarding commodity prices, downstream earnings recovery and asset sales,” Reuters quoted Moody’s Senior Vice President Pete Speer as saying.
ExxonMobil’s dividend payments to shareholders have grown at an average annual rate of 6.1% over the last 38 years. The company is committed to its dividend payout, even going as far as curtailing its capex if lower crude prices force it to.
The coronavirus pandemic hammered energy prices and reduced the value of the U.S. oil producer’s shale gas properties by more than $20 billion, Reuters said. The company posted a historic annual loss of $22.44 billion in 2020.
