Exxon Mobil Corporation (XOM), Chevron Corporation (CVX): These Oil Majors Can Net You Major Profits Over the Long Haul

Page 1 of 2

When looking for a good “buy and hold” company to add to your portfolio, you may look for a number of focal points. Growing profits? Generous dividends to reinvest? A business model that is stable over the long term? When I ask myself these questions, the first thought that pops into my mind is “big oil.” Think about it–energy is perhaps the single most important commodity in the modern world. We cannot function as a society without energy, and oil is the number one energy source in the world.

Need to fill up to go to work? Gasoline is derived from oil. The roads we drive on? Oil is used to help make asphalt. Buying a bottle of water? Plastics are derived from oil as well. Even the electricity to power your home and charge your Nissan Leaf Electric Car was probably generated with oil powered resources. The point is that oil is still the big cog of our world even with the push for fuel efficient transportation. So what is the best way to include the importance of oil in your portfolio? Let’s take a look at a few major oil companies out there. These companies will continue to grow and give you awesome returns over the long term.

Slow And Steady Wins The Race

Exxon Mobil Corporation (NYSE:XOM

Exxon Mobil Corporation (NYSE:XOM) is by market cap the largest company in the world. Exxon Mobil Corporation (NYSE:XOM) is a partial result from the break up of Standard Oil in the early 1900′s. Over the years Exxon Mobil Corporation (NYSE:XOM) has been known as a stable, slow moving, and consistent cash cow that has provided investors with very solid returns from year to year. Its dividends consist of a measly 26% of its earnings, leaving plenty of room to add on to the 31 consecutive years of dividend increases. But with Exxon Mobil Corporation (NYSE:XOM), you not only benefit from a constantly increasing dividend, but you also get aggressive share buybacks to drive earnings per share higher–and Exxon is buying back roughly $5 billion in stock each quarter. When you are the largest company in the world, you don’t have a ton of room for organic revenue growth. The upside in Exxon Mobil Corporation (NYSE:XOM) is that its size gives it great “momentum.” Its established business ventures leaves plenty of cash for dividends and buybacks to boost shareholder returns. Exxon also has the capital to invest in future technologies, making sure that its return on assets is among the best in the business, and it is safe guarded against changes in the oil industry down the road.

What Have You Done For Me Lately

Chevron Corporation (NYSE:CVX) is also a partial result of the Standard Oil break up. Chevron Corporation (NYSE:CVX) is no slouch in the size department, as it checks in at a market cap of $230.5 billion. This smaller size gives Chevron a little more room to grow than a company of Exxon Mobil Corporation (NYSE:XOM)’s size. It has earnings per share of $13.23, and it pays a dividend of $4.00. This will net you a yield of 3.36% at current prices, while only taking up 30% of Chevron Corporation (NYSE:CVX)’s earnings per share. Chevron also is perhaps the most efficient oil company in the industry, as its $24 in profits per barrel is the best in the business at this time. For a clever long term investor, a depressed stock price due to the uncertainty of an external threat can be an opportunity. Partially due to the uncertainty of a $19 billion pending Ecuador lawsuit, Chevron Corporation (NYSE:CVX) trades at only 8.8x earnings. While I don’t aim to speculate, most lawsuits settle long before the final showdown. Even in a worst case scenario, it would be but a blip in the long term performance of Chevron Corporation (NYSE:CVX). Chevron has set its sights on the Gulf of Mexico and the Asia Pacific to drive growth moving forward, as technological breakthroughs have enabled oil and gas to be extracted more efficiently from previously tough to reach areas.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!