We recently published a list of S&P 500 Dividend Aristocrats List: Sorted By Hedge Fund Sentiment. In this article, we are going to take a look at where Exxon Mobil Corporation (NYSE:XOM) stands against the other S&P 500 dividend aristocrats.
The appeal of dividend growth growth stocks is unmatched. For those considering investing in dividend stocks, growth typically outweighs yield due to the consistent returns they have delivered over the years. Within dividend growth strategies, the dividend aristocrats stand out. Of the approximately 6,000 stocks listed on the NYSE and NASDAQ, only 67 companies earn the title of dividend aristocrats. These companies have consistently increased their dividend payouts for a minimum of 25 consecutive years. They are part of the broader market and are tracked by the Dividend Aristocrat Index.
Also read: 10 Best Dividend-Paying Stocks Under $50
Companies that regularly increase their dividends typically show strong financial health and stability, indicating their consistent profitability. A report by Fortune highlighted that, although it has lagged behind its benchmark, the Dividend Aristocrat Index has surpassed nearly all US active managers over the past decade. Rupert Watts, the head of factors and dividend indices at S&P Dow Jones Indices, discussed dividend growth strategies with the global media organization. Here is what the analyst said:
“Raising your dividend for 25 plus years is no easy feat. These are high-quality companies.”
Dividend aristocrats have delivered impressive returns, surpassing other asset classes. Since the index’s inception in 2005 through September 2023, the dividend aristocrats index has provided a total return of 10.35%, outpacing the broader market’s return of 9.54% for the same period. These stocks are celebrated not only for their dividend growth and steady equity gains but also for their lower volatility. During this timeframe, dividend aristocrats exhibited a volatility level of 15.35%, compared to the market’s slightly higher 16.31%. This indicates that dividend aristocrats tend to have more stable price movements. Their consistent dividend increases over 25 years or more demonstrate their ability to reward shareholders even during tough times, such as the 2007 financial crisis and the 2020 pandemic.
The debate between high yields and dividend growth continues. As of August 19, the High Dividend ETF, which tracks high-yielding companies in the broader market, offers a dividend yield of 4.18%. This yield would have been quite attractive to investors in the past. However, this year the ETF has only returned 4.8%, compared to the market’s 18% return. According to FactSet, investors have withdrawn over $1.1 billion from the fund, which is more than 15% of its $6 billion in assets. This indicates that investors tend to prefer dividend growth over high yields, as high yields are often seen as a sign of financial difficulties. In this article, we will take a look at some of the best dividend aristocrat stocks according to hedge funds.
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 275% since May 2014, beating its benchmark by 150 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: 92
An American energy company, Exxon Mobil Corporation (NYSE:XOM) ranks second on our list of the best dividend aristocrat stocks. The company has gained popularity among investors for its strong financial stability and consistent profitability over the years, allowing it to distribute substantial dividends to its shareholders. The stock has gained by nearly 16% year-to-date.
In the second quarter of 2024, Exxon Mobil Corporation (NYSE:XOM) reported revenue of $93.06 billion, which showed a 12.24% growth from the same period last year. The company’s solid cash position is a positive indicator, particularly for maintaining and potentially increasing its dividends. It generated $10.6 billion in operating cash flow and its free cash flow for the period came in at $9.5 billion.
Exxon Mobil Corporation (NYSE:XOM) has gained significantly from its acquisitions. On May 3, 2024, ExxonMobil finalized its purchase of Pioneer Natural Resources. The deal involved issuing 545 million shares of ExxonMobil stock, valued at $63 billion at the time, and taking on $5 billion in debt. This merger established the world’s largest high-return unconventional resource development potential. After finalizing the acquisition, the company accelerated its annual share repurchase program to $20 billion through 2025, provided market conditions remain favorable. It aims to buy back over $19 billion worth of shares in 2024.
Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.95 per share on August 2, which fell in line with its previous dividend. The company has been increasing its dividends consistently for the past 41 years, which makes XOM one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on August 19 came in at 3.21%.
The number of hedge funds tracked by Insider Monkey owning stakes in Exxon Mobil Corporation (NYSE:XOM) jumped to 92 in Q2 2024, from 81 in the previous quarter. The consolidated value of these stakes is nearly $6.2 billion.
Overall XOM ranks 2nd on our list of S&P 500 dividend aristocrats. While we acknowledge the potential of XOM as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than XOM but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
