Exxon Mobil Stock Is an Unexpectedly Convincing Low-Carbon Investment

To some folks, Exxon Mobil (NYSE:XOM) is little more than a fossil-fuel producing dinosaur. Young generations of traders may choose to dismiss XOM stock in favor of more clean-energy-focused names.

Exxon Mobil (XOM) logo outside of a corporate building
Source: Harry Green / Shutterstock.com

Perhaps it’s emblematic of a widening generation gap in the 2020’s. Exxon Mobil might strike some millennials and Generation Z investors as an “OK, boomer” kind of company: old-fashioned and out of touch.

More seasoned investors, in contrast, will likely appreciate Exxon Mobil’s long history of dividend payouts. As we’ll see, the company remains a dividend aristocrat and XOM stock is ideally suited for income seekers.

Today, I’ll attempt to bridge the generational divide with a surprisingly modern profile of an old energy company. In the end, we should all be able to agree that Exxon Mobil isn’t such a dinosaur, after all.

A Closer Look at XOM Stock

In the interest of full disclosure, let’s start off with the bad news.

Exxon Mobil is currently in a negative per-share earnings position. More specifically, the company’s trailing 12-month earnings per share is -$3.12.

Most likely, the onset of the Covid-19 pandemic is partially to blame for this. The spread of the delta variant strain may continue to put negative pressure on Exxon Mobil’s earnings.

On the other hand, XOM stock has been a $55-ish stock for the past half-year. So, a $3-ish per-share earnings deficit isn’t too terrible.

Admittedly, six months of sideways share-price action isn’t particularly inspiring for momentum-focused traders.

However, let’s not forget an old saying among technical traders: the longer the base, the higher in space.

In other words, it’s possible that XOM stock is only building up tension in anticipation of a move to the upside.

To end this section, I must report that Exxon Mobil is paying a forward annual dividend yield of 6.34%.

For long-time dividend collectors such as myself, this is proof positive that Exxon Mobil still respects its loyal shareholders in the 2020’s.

Cleaning Up Its Act

As I alluded to earlier, younger generations of investors might eschew XOM stock due to an assumption that the company is an incorrigible polluter.

I’ll let you decide whether that assumption is correct or not. It ought to be observed, though, that Exxon Mobil is making an effort to change its polluting ways.

I’m not taking the stance of an Exxon Mobil apologist, but only of an opportunistic investor.

Remember, this is a massive and well-capitalized company which should be able to compete successfully with the slew of green-energy start-ups.

Since 2000, Exxon Mobil has effected a 15% reduction in methane emissions.

In that same time frame, the company has eliminated (or at least, avoided from operations) around 520 million metric tons of greenhouse gas emissions.

At least in theory, that would be equivalent to removing 110 million passenger vehicles off the roads for a year.

An Ambitious Plant-Based Project

You might never have thought of Exxon Mobil as an innovator in plant-based fuel sources.

Yet, that appears to be the company’s objective in a new diesel-focused project.

Reportedly, Exxon Mobil’s majority-owned affiliate, Imperial Oil Ltd., plans to process vegetable oil into renewable diesel at its Strathcona refinery in Edmonton, Canada.

By the numbers, this is quite an ambitious clean-energy project:

“When construction is complete, the refinery is expected to produce approximately 20,000 barrels per day of renewable diesel, which could reduce emissions in the Canadian transportation sector by about 3 million metric tons per year.”

If it goes according to plan, this project could help Exxon Mobil reach its objective of producing over 40,000 barrels per day of low-emissions fuels by 2025.

As an added bonus, the Imperial-led project is expected to create around 600 direct construction jobs.

The Bottom Line

Hopefully, I’ve changed some people’s minds about Exxon Mobil.

The idea here isn’t to defend the company, but only to provide a different perspective on XOM stock as an investment.

Over time, Exxon Mobil will still need to prove itself as a contributor to the reduced-carbon economy.

With the Imperial renewable diesel project, however, this old energy giant is off to a pretty good start.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarketsFinom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. 

Article printed from InvestorPlace Media, https://investorplace.com/2021/08/xom-stock-is-an-unexpectedly-convincing-low-carbon-investment/.

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