The energy sector has some of the best-performing and most stable stocks. The participants in this sector have been under some pressure of late due to the slowdown in the global economy and financial crisis. However, the time looks just about right to buy energy stocks as the global economy starts its recovery. There are many companies in the sector with attractive growth opportunities and healthy income potential; however, I like Exxon Mobil Corporation (NYSE:XOM) the best.
Let me explain why I’m a fan of this oil-and-gas giant, and why you should consider it for your own portfolio.
Future growth and impressive past performance
Exxon Mobil Corporation (NYSE:XOM) was able to come out of the financial crisis in relatively better shape than most of its peers. Most of the companies in the energy sector took a lot longer than ExxonMobil to get back on the growth path. ExxonMobil recorded substantial growth in revenue (over 23%) in the first year after the financial crisis of 2008. Since then, the company has been able to grow revenue at an average annual rate of 13.8%, which is extremely impressive for an energy company.
While Exxon Mobil Corporation (NYSE:XOM)’s past performance has been impressive, it’s important to identify the future growth prospects when making an investment decision. Energy demand is expected to rise in the coming years due to an increase in economic activity, mainly in Asian countries.
As a result of the shale boom, the U.S. will strengthen its position as an exporter of oil and gas, and Asian economies will be the biggest customers of North American producers. ExxonMobil, being the world’s largest publicly-traded energy company, will benefit hugely from this rising demand.
According to the energy outlook, the world population will increase by around 25% over the next three decades. As a result of this anticipated population boom, demand for energy will increase. Since the majority of the increase in population will come from Africa and Asia, the demand for energy will be the highest in these two regions.
The global energy landscape will evolve significantly as regional demand and supply patterns shift in the coming decades, creating new opportunities for international trade and economic growth. Natural gas prices will soon stabilize due to the export facilities being built in the country.
Exports of Liquefied Natural Gas (LNG) will bring inventory levels down, which will stabilize natural gas prices. Oil prices are less volatile and are expected to remain around the current levels during the current year.
Juicy dividend and solid cash flows
Exxon Mobil Corporation (NYSE:XOM) has a long history of dividends, and the company has increased its quarterly dividends for thirty years in a row. It usually increases its quarterly dividends at the end of the second quarter of the year, so, we can reasonably expect another dividend hike in the next quarter – another reason to invest in ExxonMobil in the near future.
At the moment, the company pays an annual dividend of $2.28 per share, yielding 2.5%. The yield is not mouth watering, but the consistency of dividends and the history of rising distributions at regular intervals are important factors.