For decades, oil-patch enthusiasts and income-focused investors have stuck by Exxon Mobil (NYSE:XOM). Much of the appeal of Exxon Mobil stock stems from the company’s willingness to maintain its generous dividend payouts quarter after quarter.
On the other hand, fluctuations in the oil price have caused Exxon Mobil stock to wobble. Even though Exxon Mobil is a massive company and a long-standing component of the Dow Jones Industrial Average, the company’s shares are nonetheless prone to some volatility due to fluctuations in the petroleum price.
This is a valid concern, but Exxon Mobil is thinking ahead. Even an old company can learn new tricks as Exxon Mobil is taking a future-facing leap into cleaner energy sources. At the same time, the energy giant continues to provide dividend hunters with the robust yield they’re craving.
A Closer Look at Exxon Mobil Stock
To put it bluntly, the first half of 2020 was absolutely brutal for the energy sector. Thankfully for the company’s stakeholders, Exxon Mobil’s massive size allowed it to weather the fiscal storm better than smaller competitors like Whiting Petroleum (NYSE:WLL).
Still, Exxon Mobil stock wasn’t entirely immune to the ravages of the novel coronavirus and the severe oil-price rout that happened in April. With the share price starting the year off at the $71 level, investors watched it get cut in half in a matter of months.
On March 23, Exxon Mobil stock touched its 52-week low price of $30.11. Since that terrifying time, there has been some recovery. As of Aug. 17, Exxon Mobil shares were trading in near $42.
Seeing the Value
With the dust having settled somewhat, we can discern a couple of positive developments with Exxon Mobil stock. For one thing, the trailing 12-month price-earnings ratio is 25. That’s very reasonable and suggests that even after some share-price recovery, the stock remains a good value.
And while we’re at it, let’s not ignore the dividend hunters out there. Rest assured that Exxon Mobil hasn’t forgotten about you. I recall when, just a few months ago, skittish traders on social media were speculating that Exxon Mobil would slash its dividend yield to almost nothing or even eliminate it entirely.
Perhaps they thought that the problems encountered by the likes of Whiting and Occidental Petroleum (NYSE:OXY) would spill over to Exxon Mobil. Yet, this their fears turned out to be exaggerated.
With a forward annual dividend yield of 8%, Exxon Mobil stock continues to provide steady income. Even during challenging times, this energy giant still respects its faithful shareholders.
Seeking a Cleaner Future
Not long ago, the International Energy Agency (IEA) issued a report suggesting a less-than-optimistic outlook for the traditional oil market. According to the IEA, “Ongoing uncertainty around demand caused by Covid-19 and the possibility of higher output means that the oil market’s rebalancing remains delicate.”
In light of this, investors can position themselves with energy-sector companies that are willing to adapt. In particular, they can focus on companies that are prepared to move towards non-traditional energy sources.
Exxon Mobil, in a recent move to reduce the company’s carbon footprint, demonstrated its commitment to cleaning up its act. With a five-year agreement, Exxon Mobil will buy 2.5 million barrels of renewable diesel fuel per year from Global Clean Energy Holdings (OTCMKTS:GCEH).
While this is a forward-thinking move, it can benefit Exxon Mobil in the near term as well. As Bryan Milton, president of Exxon Mobil Fuels and Lubricants Company, points out, “Chemically similar to petroleum-based diesel, renewable diesel can be readily blended for use in engines on the market today.”
The Bottom Line
The true test of an energy company is how it performs when fuel prices collapse. Exxon Mobil is passing that test with flying colors.
For the foreseeable future, Exxon Mobil stock investors can continue to collect generous dividend payouts. And with a commitment to cleaner energy sources, Exxon Mobil offers value for the present and future.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.