Smart Dividend Portfolio Edition #47: The Oil King
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Dear Investor,
Welcome to the 47th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: February 10, 2025
Another turbulent week saw most stock indexes close in the red. The Dow Jones Industrial Average (DJIA) fell by 0.54%, while the S&P 500 (SPX) was down by 0.24%. Meanwhile, the broad tech benchmark Nasdaq Composite (NDAQ) declined by 0.53%, with only the large-cap technology index Nasdaq-100 (NDX) logging in a minute gain of 0.06%.
Stocks opened sharply lower to start the week, following Trump’s earlier tariff announcement on Mexico, Canada, and China. Together, these three economies account for over 40% of total U.S. trade. Stocks later regained ground amid the temporary rollback of the levies on Mexico and Canada.
Although China was not spared – and also announced reciprocal levies on U.S. goods – tariff concerns eased until Friday, when President Trump’s announcement of plans to implement reciprocal tariffs on various countries reignited market jitters. However, this also isn’t set in stone, as the European Union has already said it is considering lowering tariffs on car imports from the U.S.
More than halfway through earnings season, corporate earnings continue to exceed analysts’ expectations. With over 60% of the S&P 500 companies having reported their Q4 results, the earnings growth rate is now projected to come in at 16.4% year-over-year, compared to analysts’ estimates of 11.8% before the start of the season.
The beat champions are Financials, Communication Services, Consumer Discretionary, Information Technology, Health Care, and Utilities, with double-digit EPS growth. Overall, 77% of the S&P 500 companies have reported actual EPS above estimates, while only 63% beat the consensus on revenues.
A similar picture can be seen in the “Magnificent” realm – except for Nvidia (NVDA), which is yet to report – where only Meta comfortably sailed past all estimates. With the weight of the Top 10 companies in the S&P 500 now reaching above 37.5% of the index’s total market value, these reports hold an outsized sway on the market moves.
Other economic reports were mixed, still reflecting a robust economy and elevated inflation. Thus, consumer sentiment fell to its lowest level in seven months as consumer inflation expectations rose. Meanwhile, the ISM Manufacturing PMI indicated that factory activity in the U.S. expanded in January for the first time since 2022.
Overall, the economy is still firmly in the “Goldilocks” phase, with the underlying fundamentals continuing to reflect robust health. Moreover, after expanding by 2.8% in 2024, the GDP is on track to deliver a strong 2.9% growth rate in Q1 2025, according to the Fed’s GDP-Now tracker. This growth rate is well above the long-term trend, supporting the case for the Federal Reserve to remain on hold with rate cuts for now.
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This Week’s Quality Dividend Stock Idea
ExxonMobil (XOM) is a global energy company involved in the exploration, production, refining, and marketing of oil, natural gas, and petrochemicals. Operating in upstream, downstream, and chemical sectors, XOM runs refineries and fuel stations under the Exxon, Mobil, and Esso brands. As one of the largest publicly traded energy companies, it leverages technology and scale to enhance efficiency, sustainability, and resource development.
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From Standard Oil to Global Energy Leader
ExxonMobil traces its origins to the 1870s with the founding of Standard Oil by John D. Rockefeller. Following the 1911 breakup of Standard Oil, two of its largest successor companies, Jersey Standard (later Exxon) and Socony-Vacuum (later Mobil), expanded globally in refining, exploration, and marketing.
In 1999, Exxon and Mobil merged in an $81 billion deal, creating the world’s largest publicly traded energy company at the time. This merger bolstered ExxonMobil’s presence in global oil and gas markets, enhancing scale, technological expertise, and operational efficiency.
Throughout the 2000s, ExxonMobil made significant investments in deepwater exploration, liquefied natural gas (LNG) projects, and unconventional resources. Key developments included major offshore discoveries in Guyana, expansion of LNG operations in Qatar, and the $41 billion acquisition of XTO Energy in 2010, marking its entry into U.S. shale.
In the 2020s, ExxonMobil refined its strategy, focusing on high-return projects, optimizing capital spending, and divesting from non-core assets. It also expanded into low-carbon technologies, investing in carbon capture, hydrogen, and biofuels to meet shifting energy demands.
Over the past decade, ExxonMobil has made key acquisitions to strengthen its position in the energy sector. The company’s acquisition of Denbury for $4.9 billion in 2023 enhanced ExxonMobil’s carbon capture, utilization, and storage (CCUS) capabilities. In May 2024, the company acquired Pioneer Natural Resources for $59.5 billion, expanding its presence in the Permian Basin with 856,000 additional acres and boosting shale oil production. These and earlier acquisitions have significantly bolstered ExxonMobil’s asset base, positioning it for continued growth in both traditional and emerging energy markets.
Today, with a market capitalization nearing $471 billion and annual revenues of approximately $349.6 billion, ExxonMobil is ranked 7th on the Fortune 500 list. The company remains a dominant force in global energy and continues to drive earnings growth through its integrated business model and strong asset portfolio, thus maintaining its leadership in oil, gas, and petrochemical production.
Integrated Energy Business
ExxonMobil operates across upstream, downstream, and chemical segments, generating revenue primarily from crude oil, natural gas, petroleum products, and petrochemicals.
When it comes to upstream production, ExxonMobil explores and produces oil and gas from conventional and unconventional resources. The acquisition of Pioneer Natural Resources bolstered its Permian Basin operations, enhancing long-term production and efficiency.
ExxonMobil’s downstream operations consist of refining crude into fuels like gasoline, diesel, and jet fuel, and the megaproducer benefits from economies of scale and a global distribution network. The chemical segment produces materials for industries like packaging and automotive, adding diversified revenue streams.
Disciplined capital allocation, cost efficiencies, and investments in high-return projects support the company’s earnings outlook. ExxonMobil has prioritized low-cost production, particularly in the Permian Basin and Guyana, where it holds advantaged assets with strong margins. With the Pioneer acquisition, ExxonMobil achieved its goal of over 50% of Upstream production from advantaged assets (Permian, Guyana, LNG) three years early. By 2030, these assets will contribute over 60%, adding 1.2 MOEBD (million barrels of oil equivalent per day), with total production reaching 5.4 MOEBD.
Earnings Outlook and Financial Performance
In the past five years, XOM’s revenues grew at a CAGR of 5.6%, with earnings rising at a CAGR of 18.5%. In Q4 2024, the company reported non-GAAP earnings of $1.67 per share, beating estimates of $1.55 per share. XOM generated revenues of $83.43 billion in Q4, slightly below estimates of $86.3 billion. Despite the slight decline in revenue, ExxonMobil achieved record production levels, particularly in the Permian Basin and Guyana, contributing to its strong financial performance.
For the full year 2024, ExxonMobil reported revenue of $349.6 billion, a slight increase from $344.6 billion in 2023. Adjusted EPS was $7.79 per share, compared to $9.52 per share in 2023, with the decline stemming from lower refining margins and softer natural gas prices compared to 2023. Despite market headwinds, ExxonMobil continued delivering robust shareholder returns while positioning itself for long-term growth in high-value energy assets.
With a focus on operational efficiency, ExxonMobil maintains strong free cash flow generation, even in volatile oil price environments. Its cash flow from operations in 2024 was $55 billion, with free cash flow of $34.4 billion. The company expects to add another $30 billion to its existing cash flow by 2030, assuming constant prices and margins. The projected cash flow ramp-up is a part of XOM’s five-year strategy, which the company laid out in December 2024. This strategy includes increasing oil and gas production by 18% by 2030, focusing on areas like the Permian Basin and Guyana, and reducing costs by $20 billion over the same period. These efforts should support the plans to boost earnings by $20 billion by 2030.
ExxonMobil has a stellar balance sheet with very low debt. Its debt-to-equity ratio of 13% and net-debt-to-capital ratio of 6% are ranked among the lowest third for the industry. Its capital efficiency and profitability metrics – including ROE, ROA, and FCF margin – make the top 30% in its industry, while its operating and net profit margins come in above the average for U.S. Oil and Gas. In September 2024, S&P Global affirmed a long-term credit rating of ‘AA-,’ reflecting ExxonMobil’s strong financial profile and prudent management.
The company’s strong balance sheet and cash generation support its plans to continue pursuing strategic acquisitions to accelerate its earnings growth. This comes in addition to XOM’s intention to more than triple its production in the Permian shale, while also significantly upping Guyana operations.
Shareholder Value Through Dividends and Buybacks
ExxonMobil has consistently returned value to shareholders, increasing its annual dividend for 43 consecutive years, which grants the company the status of “Dividend Aristocrat”.
Although the pace of the increases is far from breathtaking at an annual 2.5% over the past five years, this is balanced by XOM’s already high payout. ExxonMobil’s dividend yield of 3.5% is higher than the average for the Energy sector and almost triple the S&P 500 yield. Moreover, analysts expect the pace of dividend increases to pick up moderately in the next couple of years.
ExxonMobil’s capital efficiency has been a key driver of shareholder returns, with a 12.7% return on capital employed (ROCE) in 2024—well above its cost of capital. The company’s five-year average ROCE of 10.8% leads the industry. Strong capital productivity allowed ExxonMobil to return over $125 billion to shareholders in the last five years through dividends and share repurchases, more than any other international oil company.
Alongside dividends, ExxonMobil repurchased over $19.3 billion in shares in 2024. Following its acquisition of Pioneer Natural Resources, the company plans to increase share buybacks to $20 billion annually through 2026, subject to market conditions.
Despite strong financial performance and generous shareholder compensation, XOM’s stock gained only about 8.5% over the past year, well under the overall growth of the market. However, this weak performance was exclusively led by external factors, as the company’s peers – Chevron Corporation, ConocoPhillips, and Occidental Petroleum – fared much worse. Moreover, leading Wall Street analysts assign ExxonMobil a “Buy” rating with a price target implying an upside of over 20% in the next 12 months.
Meanwhile, the stock trades at attractive valuations, with its P/E ratio carrying a very modest premium to the broad Energy sector while coming in line with the average for its peers. Furthermore, when looking at its future cash flows, XOM appears to be undervalued by about 40%.
Investing Takeaway
ExxonMobil is a leading U.S. energy company with a diversified business model spanning oil production, refining, and petrochemicals. Through strategic acquisitions, cost efficiencies, and disciplined capital allocation, it maintains strong free cash flow and a stellar balance sheet, supporting its generous shareholder compensation strategy. XOM’s five-year strategy aimed at increasing growth and profitability further supports analysts’ optimistic views regarding its stock performance and dividend increases over the next couple of years.
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Dividend Investor Portfolio
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Portfolio News
▣ Amgen (AMGN) reported strong Q4 results, with sales rising 11% to $9.1 billion, driven by a 14% increase in volume. The company’s 10 products posted double-digit growth. For FY25, the company projects $35 billion in revenue (vs. $34.53 billion expected by analysts) and EPS of $20.6 (close to the $20.82 expected by analysts). It also plans up to $500 million in share buybacks.
▣ PepsiCo (PEP) reported mixed Q4 results with adjusted EPS of $1.96 on revenues of $27.8 billion. For reference, analysts were expecting the beverage giant to report earnings of $1.94 per share on revenues of $27.9 billion. In FY25, the company expects its organic revenues to grow in the low-single-digits while core EPS on a constant currency basis is likely to rise in the mid-single-digits. Additionally, PEP expects to buy back stock worth $1 billion and declared a quarterly dividend of $1.36 per share, a 7% increase year-over-year and payable on March 31 to shareholders of record on March 7, 2025.
▣ Qualcomm (QCOM) reported robust fiscal Q1 results with earnings of $3.41 per share on revenue of $11.67 billion versus analysts’ predictions of $2.96 per share on revenue of $10.9 billion. Looking ahead, in the second quarter, QCOM expects revenues of $10.6 billion at midpoint, compared to consensus estimates of $10.36 billion. Earnings in the second quarter are projected to be $2.8 per share compared to expectations of $2.71 per share. Meanwhile, ARM Holdings withdrew its threat to revoke Qualcomm’s architecture license, settling a legal dispute over its acquisition of Nuvia. This clears uncertainty about Qualcomm’s future use of Arm’s technology after an initial breach notice in October 2024.
▣ Philip Morris (PM) reported mixed fourth quarter results with adjusted EPS rising 14% year-over-year to $1.55, missing estimates of $1.60. Revenue grew by 7.3% to $9.71 billion, beating forecasts of $9.04 billion. For FY24, PMI reported adjusted EPS of $6.57 on $37.9 billion in revenue. Looking ahead, it expects FY25 organic revenue growth of 6%–8% and adjusted EPS of $7.10 at midpoint, exceeding analysts’ $7.03 estimate. The company does not plan share repurchases in FY25 and forecasts Q1 adjusted EPS of $1.60 at midpoint. PMI’s upbeat FY25 outlook is fueled by strong growth in its nicotine pouch brand, ZYN. Earlier this month, the U.S. FDA granted PMI a license to market ZYN in the U.S.
▣ JPMorgan Chase (JPM) and other major banks could stand to benefit amid reports that the U.S. Federal Reserve is planning an easier stress test on financial institutions this year. The Fed’s 2025 stress test parameters suggest a softer stance on banks, with a 10% jobless rate and a 33% home price drop being less severe than in recent years. These stress tests were first introduced in the wake of the 2008 financial crisis, and are designed to ensure banks can endure crises while maintaining lending, though requirements have been stricter since the 2020 pandemic.
▣ Edison International (EIX) Southern California Edison (SCE), a subsidiary of Edison International informed the California Public Utilities Commission that its equipment may be linked to two recent wildfires in Southern California. While data suggests possible involvement in the Eaton fire, no clear evidence has been found. SCE also believes its equipment may have started the Hurst fire and continues investigating all possible causes, according to the company’s CEO.
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Recent Trades
We are happy to announce the addition of ExxonMobil to our Portfolio. The company’s strong capital discipline and cost efficiencies bolster its earnings outlook. With a solid dividend history, growing free cash flow, and a resilient balance sheet, the company remains well-positioned to sustain and grow payouts, making it an attractive addition to a dividend portfolio amid stable energy market conditions. In addition, the stock is down by around 15% from its all-time high in October, making it an attractive buy.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.77% | +9.66% | $5,758.21 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Mar 14, 2025 | Apr 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 5.79% | $1.52 |
| Amgen (AMGN) | Feb 14, 2025 | Mar 07, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Mar 07, 2025 | Mar 24, 2025 | 2.56% | $20.84 |
| Edison International (EIX) | Mar 28, 2025 | Apr 30, 2025 | 5.12% | $3.31 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.92 |
| IBM (IBM) | Feb 10, 2025 | Mar 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Apr 04, 2025 | Apr 30, 2025 | 2.86% | $5.00 |
| Kroger (KR) | Feb 15, 2025 | Mar 01, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Mar 10, 2025 | Mar 17, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Mar 07, 2025 | Mar 31, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Mar 21, 2025 | Apr 09, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | Mar 06, 2025 | Mar 27, 2025 | 2.25% | $3.40 |
| VICI Properties (VICI) | Mar 21, 2025 | Apr 04, 2025 | 5.19% | $1.72 |
| ExxonMobil (XOM) | Feb 12, 2025 | Mar 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
