Today’s new idea comes from Leeb Income Performance.
“This issue we recommend Exxon Mobil Corp. (XOM, NYSE), one of the largest corporations in the world and the largest publicly traded international oil and gas company. Long-term, the company expects global energy demand to grow by about 35% before 2040. That means there is significant profit potential if Exxon can stay on top of its game.
“This huge company pays a healthy and safe 2.8% annual dividend. In fact, Exxon has paid some $44 billion in dividends in the last five years alone, and has increased its dividends every year since 1983, including a 10.5% hike in the second quarter of this year.
“But thats not all. The company bought back $20 billion of its shares in 2012 alone, and a total of $101 billion worth of shares in the last five years. Overall, because of the buybacks, the number of outstanding shares has been reduced by 35% since Exxon merged with Mobil 14 years ago.
“In addition, Exxon in 2012 had a notable 25% return on average capital employed, higher than the average of the five preceding years and the best performance among peers. Indeed, its 2012 earnings of nearly $45 billion represented a 9% increase from the year before.
“Its reserve replacement ratio, an important measure for all oil producers, stands at 115%. Its especially remarkable given the shrinkage of global oil and gas resources, and the increasing expense and difficulty of finding new reserves.
“At present the company holds some 87 billion oil-equivalent barrels (BOEB), including 25 BOEB in current operation and construction. Another 27 BOEB are in design and development stages and still a further 35 BOEB are slated for future production. In fact, the oil giant can be expected to benefit from its scale as its 2012 investment of $39.8 billion would be hard to match.
“Even more remarkable, however, has been the commitment at Exxon to raising the environmental bar. In 2012, for example, the company cut its carbon dioxide equivalent emissions by a total of nearly 10 million metric tons, roughly three quarters via increased energy efficiency and co-generation and 25% from cuts in gas flaring.
“Another reason we like Exxon is its integration across all aspects of the oil and gas business. The company has a huge, diverse and well-balanced resource base and is also the world’s largest integrated refiner and lube basestock manufacturer, and its chemical company has the distinction of being the highest return business among peers. Buy Exxon Mobil.”
Stephen Leeb, PhD., Leebs Income Performance Letter, www.leebincomeperformance.com, 877-883-8356, July 2013