Exxon Mobil Corp (XOM) ranks 3rd in Insider Monkey’s list of the 10 Best Dividend Aristocrat Stocks to Buy Now.
Click to see the full list of 10 Best Dividend Aristocrat Stocks to Buy Now.
Before analyzing the stock, let’s see what’s happening in the dividend investing space these days.
Dividend growth investing strategy is in the spotlight these days as investors scramble to offset market risks in a higher-for-longer environment where interest rates aren’t expected to come down anytime soon. Matt Powers, Powers Advisory Group President, while talking to CNBC, recently said that while a high interest rate environment is a headwind for dividend growth strategy, he is looking to buy more dividend growth stocks and practice patience in the current scenario. The analyst said his dividend income strategy is looking to increase total returns by preferring dividend growth stocks instead of high-yield dividend stocks. Matt Powers said that he looks for 10-year track record of dividend growth while choosing stocks.
He highlighted that payout ratio is one of the most important metrics in dividend strategies. For example, one of the notable picks of Matt Powers is MasterCard, whose payout ratio is less than 30%. This, according to Powers, shows that the company is investing significantly to grow. He’s also picking up Hershey on the back of rising cocoa prices. Lockheed Martin is another dividend growth stock pick of the analyst amid the geopolitical situation that bodes well for companies like Lockheed. This shows instead of limiting focus to yields, dividend growth investors should focus on core business strengths and catalysts because these are the factors that affect dividend payment and income growth trajectory of companies.
Dividend investing has always sparked investor interest amid a proven track record of dividend strategies. A Raymond James report titled “The Power of Dividends in a Portfolio” highlighted that $1 invested in the S&P 500 in December 1929 would have grown to $57 over the following 75 years. But the same $1 invested along with reinvested dividends would have grown to a whopping $1,353.
Dividend stocks have also contributed heavily to the total market returns over the past several decades. From 1930 to 2023, 40% of the annualized total return of the S&P 500 came from payment and reinvestment of dividends.
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Exxon Mobil Corp (NYSE:XOM)
Number of Hedge Fund Investors: 81
With over four decades of consistent dividend growth, Exxon Mobil Corp (NYSE:XOM) is one of the best dividend aristocrat stocks to buy now. Over the past five years, Exxon Mobil Corp’s (NYSE:XOM) dividend growth rate came in at 2.20% per year. Exxon Mobil Corp’s (NYSE:XOM) future looks bright. Exxon Mobil Corp (NYSE:XOM) has pledged a whopping $20 billion and $25 billion in annual capex spending through 2027. During the first nine months of last year, Exxon Mobil Corp’s (NYSE:XOM) FCF came in at $28.1 billion. Out of that, just $11.1 billion were paid in dividends. Exxon Mobil Corp’s (NYSE:XOM) payout ratio is just 46%, which means it’s spending for business growth, a healthy sign.
As of the end of the first quarter of 2024, 81 hedge funds reported owning stakes in Exxon Mobil Corp (NYSE:XOM). The biggest stakeholder of Exxon Mobil Corp (NYSE:XOM) during this period was Ken Fisher’s Fisher Asset Management which owns a $3 billion stake in Exxon Mobil Corp (NYSE:XOM).
Madison Dividend Income Fund stated the following regarding Exxon Mobil Corporation (NYSE:XOM) in its first quarter 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)
Exxon Mobil Corp (NYSE:XOM) ranks 3rd on our list of the 10 Best Dividend Aristocrat Stocks To Buy Now.
Click to see 2 Dividend Aristocrat Stocks Better Than ExxonMobil.
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Disclosure: None. This article is originally published at Insider Monkey.