The stock of this oil company is seeing renewed momentum. The shares have a current annual dividend yield of 6.24%, paid quarterly.
Exxon Mobil Corporation (XOM)
From DRIP Investor
Mean reversion has been the story for the Editor’s Portfolio so far in 2021. Indeed, the three worst-performing stocks in 2020—Walgreens (WBA), H&R Block (HRB), and Exxon Mobil—have been crushing the market so far this year.
Exxon Mobil, the biggest loser last year (down 41%), is up 32%.
All of the stocks are handily outpacing the 4% gain in the S&P 500 Index. This cohort of stocks is benefiting from a number of factors. First, the “economic reopening” theme is helping to drive the energy sector, as a jump in economic activity should fuel demand for energy. Also, energy prices have gotten a lift from the winter storms that have been battering a large swath of the nation.
Investors searching for yield in this low-yield environment are probably helping the stocks as well. All of the stocks offer yields well in excess of the yield on a 10-year Treasury note (roughly 1.3%) and the yield on the S&P 500 (about 1.5%). Exxon Mobil yields more than 6%.
Finally, investors have shown a willingness to buy into “troubled” stocks and groups so far this year, reflecting an increased appetite for risk. That “risk-on” mentality has helped these stocks. Of course, the big question is the following—will the gains continue?
Given just how bad the energy sector has been in recent years, I would not be surprised if mean reversion kicks in a bit longer in Exxon. I think the stock can breach the $60 level over the next 12 months.
Please note that Exxon offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company.
Charles B. Carlson, CFA, DRIP Investor, dripinvestor.com, 800-233-5922, March 2021