Mike Khouw Sees Warning Signs About Exxon's Dividend

Mike Khouw said on CNBC's "Options Action" that the options market is suggesting that Exxon Mobil Corporation's XOM dividend may be in some jeopardy.

Right now, Khouw said the options market is forecasting an implied dividend range of somewhere between 30 cents and 50 cents over the next ex-dividend period, declining to somewhere between 20 cents and 30 cents by this time next year. That would be a significant cut from the 87 cents the company is currently paying.

Khouw said there are two ways to think about this. Either there could be some probability that Exxon Mobil will cut the dividend entirely or a higher possibility that it just gets cut materially. Khouw said when the dividend exceeds your free cash flow, something's gotta give.