Exxon Mobil Corporation (NYSE:XOM) is the world’s largest publicly traded company and it continues to offer a lot of value to investors. In the last five years, the company returned $145 billion to its stockholders in the shape of dividends and share repurchases and the company will continue to reward investors that believe in it for years to come.
While ExxonMobil’s dividend yield is not very high, the company has raised its dividend rate by 59% in the last five years. The company’s current dividend yield is 2.7%, with a payout ratio of 25%.
The yield falls below many of the competitors such as Chevron Corporation (NYSE:CVX)‘s 3.2%, Royal Dutch Shell plc (ADR) (NYSE:RDS.A)‘s 5.3%, BP plc (ADR) (NYSE:BP)‘s 4.8%, and TOTAL S.A. (ADR) (NYSE:TOT)‘s 5.8%. The low payout ratio of 25% tells us that the company could increase its dividend rate by 50% to 60% without suffering in the process.
Performance
ExxonMobil is known to have a very well diversified portfolio in addition to a well-disciplined approach to making investments. The company has oil and natural-gas projects going on in many different countries around the world. This is good because if something goes wrong in one of the countries where the company operates (for example, a war or natural disaster), it can offset its losses by focusing on other countries where it enjoys a presence.
Future outlook
In the next five years, Exxon Mobil Corporation (NYSE:XOM) plans on investing nearly $200 billion on new projects. For example, the company will invest a large sum in exploring and developing oil in the Russian arctic. Furthermore, the company will start more than 20 upstream projects between now and 2016, including the Kearl oil sands project in Canada and the liquefied-natural-gas project in Papua New Guinea.
Exxon Mobil Corporation (NYSE:XOM) is known for being really conservative and careful with its investments, and the company is famous for taking well-calculated risks. If ExxonMobil puts its money in a project, we can almost be certain that the project will bring the company a lot of money. When ExxonMobil commits putting $200 billion on new projects, we can almost be sure that the company expects to earn multiple times that money in the long run.
In the last 20 years, ExxonMobil delivered 12% in annual total returns for investors (this figure reflects share price appreciations and dividends combined). This compares well with the 8% enjoyed by the S&P 500 Index and 11% enjoyed by oil companies on average.
As the global economy grows rapidly, energy demand is likely to increase. As most of the high-quality energy resources are non-renewable, oil companies are pressured to find new reserves at all times. In 2012, Exxon Mobil Corporation (NYSE:XOM) was able to replace 115% of the oil it extracted from its proven oil reserves. This is very impressive for a company of ExxonMobil’s size.
Analysts expect ExxonMobil to earn $8.05 this year, followed by $8.26 next year, $8.40 in 2015 and $8.42 in 2016. I am effectively looking for a forward P/E ratio of 11 for this company. When analysts look at an oil company’s future earnings, they usually assume that oil prices will stay the same as they are today. If oil and natural-gas prices were to increase, many analysts would find themselves upgrading their estimates for ExxonMobil.
Partnerships
Exxon Mobil Corporation (NYSE:XOM) has many partnerships with other oil giants that will benefit both ExxonMobil and its partners. For example, ExxonMobil and Statoil ASA (ADR) (NYSE:STO) will jointly develop the Julia oil field that’s located in Gulf of Mexico. The oil field is expected to have 6 billion barrels of oil and the companies will be able to pull 30,000 barrels of oil everyday. The project is scheduled to start-up in 2016.
