Exxon Mobil Corporation (XOM) Outshines Peers in Prioritizing Longevity

Page 1 of 2

Between Exxon Mobil Corporation (NYSE:XOM)Chevron Corporation (NYSE:CVX) and BP plc (ADR) (NYSE:BP), which company presents the best value for income-oriented investors? This is arguably the most recurrent debate in income-investment circles.

Exxon Mobil CorporationAs an income investor, your satisfaction is not drawn from the hefty paycheck you receive at the end of every three-month period, but rather the repeated receipt of similar, or bigger, paychecks moving forward. You’d want to establish a risk-free portfolio which, even in your golden years, can be inherited by your grandchildren. If this is what you want, I’d recommend Exxon Mobil Corporation (NYSE:XOM) over Chevron Corporation (NYSE:CVX) or BP plc (ADR) (NYSE:BP).

Although all three companies present commendable income opportunities for investors, ExxonMobil goes a step further to offer security and peace of mind. With Exxon Mobil Corporation (NYSE:XOM), you can sit back and enjoy your retirement without having to constantly tap away at some device for news updates and stock trends.

Don’t BP and Chevron offer better yields?

On the face of it, BP and Chevron offer a better deal for income investors. BP currently offers a yield of around 5.3%. Chevron, on other hand, offers a yield of about 3.2%. Exxon Mobil Corporation (NYSE:XOM) trails the pack with its 2.8% yield. This essentially means that BP and Chevron investors are set to gain more (not in actual amount) when stacked against ExxonMobil shareholders. But is this all?

Don’t forget to read the fine print

1. Exxon Mobil Corporation (NYSE:XOM) offers a lower yield but generates more cash flow than Chevron (close to two times more). If anything, Chevron should have a lower yield than ExxonMobil, but it does not. Doesn’t this mean that Chevron is accumulating debt, or worse, tapping into its coffers in order to maintain its yield?

In 2012, Chevron’s free cash flow came in at $7.9 billion compared with Exxon’s $21.9 billion. This contrast suggests that Chevron should reduce its yield slightly and perhaps focus on another strategy to create shareholder value, like increased share buybacks. It can perhaps increase its current share buyback of approximately $1.3 billion.

2. How else do Chevron and ExxonMobil enhance shareholder value? Stock buybacks? Yes, they do have these. But as it is, ExxonMobil presents the best stock-buyback program when compared with Chevron and BP.

In 2012, it bought back $20.8 billion, compared with BP’s much lesser $4.1 billion. Even if BP buys back $8 billion as earlier announced, it will still trail ExxonMobil.

3. Is BP’s future that certain? As far as its stock is concerned, a downside could come at anytime. In addition to the weak oil prices that are hurting its margins, its court battles are also placing an equally significant strain on its stock.

By the fall of 2012, the oil big wig had spent a whopping $42.2 billion in meeting the costs and fines associated with the infamous 2010 Gulf of Mexico oil spill. However, that was merely the beginning. BP is still in court battling more than 160,000 claims. I believe that this court case, coupled with risks of thinning margins, beg the question:  Is BP’s dividend yield sustainable in view of the looming uncertainty? I guess not.

ExxonMobil always has one foot in the future

Despite the innumerable challenges in the energy sector, ExxonMobil always manages to get through. It does this because it always has one foot in the future.

Let’s go back to mid 2010 when ExxonMobil closed the $31 billion XTO Energy deal. Although the closure of the deal provided more traction for ExxonMobil in the natural-gas sector, it was met with criticism in view of the weak forecasts for natural gas at the time. Indeed, natural-gas prices later hit unprecedented lows in mid 2012. This trend, however, changed and natural-gas prices have since trended upward. In fact, there are heading toward healthy levels.

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 Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

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!