1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 92
Exxon Mobil Corporation (NYSE: XOM) is on track to complete its 42nd consecutive year of dividend increases by the end of 2024. Although the company’s dividend growth has slowed in recent years compared to the early 2000s, Exxon is implementing strategies to promote ongoing growth.
The company’s corporate plan outlines a $14 billion increase in annual earnings and cash flow by 2027 due to cost savings, reinvestments, and low-carbon initiatives. Exxon Mobil Corporation (NYSE: XOM)’s low-carbon division is projected to play a significant role in future cash flow, with a goal of achieving a 15% return on investment from projects involving lithium, hydrogen, biofuels, and carbon capture and storage. This diversification aligns with the company’s commitment to a sustainable energy future.
Exxon Mobil Corporation (NYSE:XOM) has a strong financial position, backed by a payout ratio of 45.7%, which supports its dividend. Although fluctuations in oil prices could affect earnings, the company’s overall stability and 3.3% yield make it an attractive option for investors looking for a solid energy stock and a source of passive income.
Here’s what Madison Investments said about Exxon Mobil Corporation (NYSE: XOM) in its Q1 2024 investor letter:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors.
Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per year through 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
Overall, Exxon Mobil Corporation (NYSE:XOM) ranks first among the 10 best utility dividend stocks to buy. While we acknowledge the potential of utility companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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