We recently compiled a list of the Top 10 Dividend Stocks To Buy According To Hedge Funds. In this article, we are going to take a look at where Exxon Mobil Corporation (NYSE:XOM) stands against the other dividend stocks.
The sustained high inflation over the past two years has resulted in increased borrowing costs, posing difficulties for both businesses and consumers. Additionally, uncertainty surrounding potential interest rate cuts by central banks, regulatory changes under the new US administration, and ongoing geopolitical tensions have further dampened economic activity. In this challenging landscape, competition for capital has intensified, with companies focusing on their competitive advantages and adjusting their strategies for both short-term stability and long-term growth to secure essential resources amid rising economic uncertainty.
READ ALSO: 12 High Growth Low Dividend Stocks To Invest In
Dividends are becoming increasingly attractive in the current market environment. A report from S&P Global indicates that global dividend growth saw a significant boost in 2024, rising by 8.5%. This growth was especially notable in the Asia-Pacific region, where government policies encouraged companies to shift from annual to semiannual dividend distributions. Meanwhile, the US market experienced a surge in new and reinstated dividends, with the technology, media, and telecommunications (TMT) sector playing a key role in driving this trend. The report also pointed out that over the past decade, companies across the broader market—excluding real estate investment trusts (REITs)—have, on average, distributed 85% of their discretionary cash flow (DCF), which is calculated as operating cash flow minus capital expenditures. On average, this distribution has been divided between dividends and share buybacks, with 47% allocated to dividends and 38% directed toward buybacks.
Global dividend growth had been slowing since the post-COVID recovery, but that trend reversed last year, with the growth rate accelerating to 8%. Shareholders received approximately $180 billion more in payouts than in 2024, which came as a surprise given the prevailing geopolitical and economic uncertainties, according to an S&P Global report. The firm projects that total global dividend payments will remain at $2.3 trillion in 2025.
Analysts point out that earnings growth has traditionally been the key driver of dividend increases. With strong earnings growth recorded last year, expectations for 2025 are even higher. Goldman projects an 11% rise in earnings per share this year, up from an estimated 8% in 2024, which is expected to drive a 7% increase in dividends, compared to a 6% rise last year. Meanwhile, Ohsung Kwon, a US equity strategist at BofA Securities, holds an even more optimistic view, forecasting a 12% dividend boost this year, supported by accelerating earnings growth.
Historically, dividends accounted for 40% of the market’s total returns from 1936 to 2012, but their contribution has dropped to just 16% over the past decade, according to a BofA Securities research note published late last year. However, Kwon expects dividends to play a more substantial role in overall market returns moving forward. In view of this, we will take a look at some of the best dividend stocks according to hedge funds.
Our Methodology
For this article, we scanned Insider Monkey’s database of over 1,000 hedge funds and identified the top 10 companies that pay regular dividends to shareholders and have dividend yields of at least 1%, as of February 25. This means the stocks mentioned in this list are the most popular dividend stocks among the elite hedge funds in America. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Aerial view of a major oil rig in the middle of the sea, pumping crude oil.
Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 104
Exxon Mobil Corporation (NYSE:XOM) ranks fifth on our list of the best dividend stocks, with 104 hedge funds in Insider Monkey’s database owning stakes in the American energy company, up from 86 in the preceding quarter.
The company announced late last year that its annual project spending is expected to increase to between $28 billion and $33 billion from 2026 to 2030, aiming to boost oil and gas production by 18%. As a result, the company anticipates an additional $20 billion in earnings and $30 billion in cash flow by the end of the decade, reinforcing its commitment to sustainable, competitive, and growing shareholder returns. In addition, Exxon Mobil Corporation (NYSE:XOM) raised its cost-reduction target to $18 billion by 2030, up from the previous goal of $15 billion by 2027.
In the fourth quarter of 2024, Exxon Mobil Corporation (NYSE:XOM) reported $83.4 billion in revenue, marking a 1.1% decline from the same period a year earlier. Since 2019, it has achieved $12.1 billion in structural cost savings, outpacing industry peers and mitigating the effects of inflation and expansion. For the year, it recorded the highest return on capital employed in its sector at 12.7%, with a five-year average of 10.8%.
In fiscal year 2024, Exxon Mobil Corporation (NYSE:XOM) showcased strong financial performance, generating $55 billion in free cash flow—the third-highest level in the past decade. Total free cash flow for the year reached $36.2 billion, while $16.7 billion was returned to shareholders through dividends. The company also remains committed to its $20 billion annual share repurchase program, which is set to continue through 2026. Moreover, it has maintained a 42-year streak of consecutive dividend increases. The company offers a quarterly dividend of $0.99 per share and has a dividend yield of 3.62%, as of February 25.
Overall XOM ranks 5th on our list of the dividend stocks according to hedge funds. While we acknowledge the potential for XOM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
