In the volatile stock market, Dividend Aristocrats shine as beacons of stability. These S&P 500 Index ($SPX) members boast over 25 years of consistent dividend growth, making them favorites among investors seeking reliable returns amid economic squalls.
Among these stalwarts is Exxon Mobil Corporation (XOM), a standout with a robust track record in the oil and gas industry. Despite the oil market volatility, Exxon Mobil maintains a strong cash flow and has consistently increased dividends, reflecting its resilience and investor-friendly approach.
Brokerage firm Morgan Stanley (MS) notes that ExxonMobil is currently trading at a significant discount of approximately 55% compared to the broader market, despite robust cash flow/share growth that outperforms the S&P 500 by 50%. With a generous shareholder return, ExxonMobil presents an attractive opportunity for long-term investors looking to secure stable gains.
Given Exxon’s attractive valuation and enduring dividend history, now could be the perfect time to grab the shares at a discount. Let's have a closer look.
About ExxonMobil Stock
Exxon Mobil Corporation (XOM), with a market cap of $467.9 billion, is a global energy powerhouse. Established in 1870 and headquartered in Spring, Texas, Exxon spans the entire spectrum of the energy sector, encompassing exploration, production, refining, and the distribution of petroleum products. This integrated business model solidifies Exxon's position as an industry leader and helps to insulate it from oil price (CLN24) volatility.
Shares of XOM are up 18% on a YTD basis, outperforming the S&P 500 Energy Sector SPDR’s (XLE) 11.9% gain over this time frame.
ExxonMobil has continued its impressive streak of annual dividend increases for 41 years, showcasing its steadfast commitment to delivering value to shareholders through dividends.
On April 26, the company's board declared a dividend of $0.95 per share of common stock, payable on June 10. With an annualized dividend of $3.80, ExxonMobil offers a robust dividend yield of 3.20%, surpassing XLE's 3.07% and underscoring its appeal among income-seeking investors in today's market.
In terms of valuation, Exxon Mobil stock trades at 12.32 times forward earnings, in line with peers like Chevron (CVX) and below its own historical averages.
ExxonMobil Posts Mixed Q1 Earnings
Shares of the energy giant dipped on April 26 following ExxonMobil's mixed Q1 earnings results. While its total revenue of $83.1 billion topped estimates, its EPS fell 26.2% annually to $2.06, missing Wall Street's forecasts by 5.9%. The weak performance stemmed from lower natural gas prices (NGM24) and reduced production.
Despite these mixed results, ExxonMobil's cash flow remained robust, with $14.7 billion generated from operations and $10.1 billion in free cash flow. The company returned $6.8 billion to shareholders through $3 billion in share buybacks and $3.8 billion in dividends. Capital and exploration expenditures for the quarter stood at $5.8 billion, fueling high-margin production growth in hotspots like Guyana, Brazil, and the Permian Basin. This investment is set to supercharge earnings from their product solutions, driving future profitability.
Looking ahead, ExxonMobil’s recent acquisition of Pioneer Natural Resources is a game-changer for the Permian Basin to boost efficiency and cut environmental impact. Leveraging Pioneer’s expertise and Exxon’s technological and financial prowess, Exxon expects to ramp up output to 2 million barrels daily by 2027. This strategic move underscores ExxonMobil’s commitment to long-term growth and sustainability.
Analysts tracking Exxon Mobil predict its EPS to grow to $9.57 in fiscal 2024, up marginally year over year, and then another 7.2% to $10.26 in fiscal 2025.
What Do Analysts Expect for ExxonMobil Stock?
On May 15, Morgan Stanley gave ExxonMobil a bullish nod, resuming coverage with an "Overweight" rating and a $145 price target, which implies an upside potential of 21.7%.
Along with the stock’s discounted valuation, analyst Devin McDermott highlighted Exxon’s integrated operations and strategic investments, projecting substantial earnings growth and competitive advantages in energy, chemicals, and low-carbon sectors, bolstered by cost cuts and low-cost projects in key markets.
ExxonMobil has a consensus “Moderate Buy” rating overall. Of the 19 analysts covering the stock, 12 advise a “Strong Buy,” and seven give a “Hold.”
The mean price target of $135.18 suggests an upside potential of 13.4% from the current price levels. The Street-high target price of $152 for ExxonMobil, newly raised by UBS (UBS) earlier this month, implies that the stock could rally as much as 27.5% from current levels.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
