Exxon Mobil (XOM) stock was one of the biggest names in oil and gas. Is it worth keeping in your portfolio today? Here’s what you should know.
You might not know Vacuum Oil Works or Colonel Edwin Drake, but in 1859, Drake, along with Uncle Billy Smith, drilled an oil well in Titusville, Pennsylvania. That well was the start of something that’s now a household name. And while Vacuum, Drake, and Smith may be unfamiliar, you undoubtedly know about Exxon Mobil and XOM stock.
Before there was Exxon (XOM), the company went through a vast number of names, partnerships, and mergers. It wasn’t until 1972 that the world would know this oil and gas company as Exxon. Then in 1999, Exxon and Mobil merged to give us the Exxon Mobil Corporation.
Today you can find more than 11,000 Exxon, Mobil, and Esso gas stations just in the U.S. And of course, XOM stock also includes other divisions within the company, such as manufacturing and marketing commodity petrochemicals and other petroleum products, commercial travel fuels and lubricants, and business segments around the globe. Exxon Mobil is, without question, one of the biggest names in oil stocks. But does the big name make it worth adding to or keeping in your portfolio?
What XOM stock can and can’t do for your investment portfolio?
In 2014, Exxon was one of the richest companies on Wall Street, with a $445 billion market cap and a share price north of 100. Then, oil prices started to nosedive, falling from roughly $115 a barrel at their summer 2014 apex, to $36 a barrel by early 2016. Then there was that -$37 a barrel dip in the spring of 2020. That’s around the same time that Exxon shares spiraled down 50% as earnings went negative for the first time in decades.
Despite this negative news, Exxon has managed to keep its record of 37 years of consecutive dividend growth intact, and it’s one of the highest-paying dividend stocks listed on the Dow. Additionally, longer-term predictions are quite positive, as analysts foresee EPS growth in 2021 average about 172% and 82% the following year as global oil and gas demand are expected to rise.
In the short term, XOM stock could have some buy-low, turnaround stock value. That said, Exxon will likely never again grow like it did a decade ago, when the company grew sales by an average of 25% a year in 2010-11 and EPS by an average of 45%. The best the company can hope for now is consistent top- and bottom-line growth, year after year.
This is all to say that, overall, XOM stock is on the volatile side. However, if you are interested in big name stocks with steady dividends, it’s worth looking into the Dividend Aristocrats. The Dividend Aristocrats are a select group of companies that have increased their dividends every year for at least 25 straight years. The S&P 500 offers a Dividend Aristocrats ETF, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).
The ETF, which includes XOM stock, provides broad exposure to an exclusive group of high-quality, blue-chip stocks. Most are from established industries, like consumer staples and industrials, and 87% are large-cap stocks. Buying the Dividend Aristocrats ETF is an easy way to secure an income stream that rises every year, and get broad exposure to American large-cap stocks, with a bit of an old-economy bias.
One general note regarding some of these big companies: Once a good stock has fallen, it’s essentially “on sale.” It’s far more prudent to “buy low” on high-quality, fallen stocks than it is to cash them in. There are, of course, exceptions. During a market correction, you might sell shares of a great company that’s been out of favor, such as Exxon Mobil, and move that money into shares of a great company that’s been exhibiting more of a thriving share price.
What are your thoughts on some of these well-known stocks that appear to be past their prime? Do you think they are still worthy investments?