Exxon Mobil Corp. (XOM) is a world leading energy company. Their main business is in the exploration and production of crude oil, natural gas and petroleum products.
Owners of Exxon Mobil stock have enjoyed a long history of annual dividend increases dating back 30 years. Investors interested in owning oil companies oftentimes first give consideration to Exxon Mobil, the largest publicly traded oil company. Let’s take a look at how an investment in this oil company would have fared over the past 10 and 20 years.
A 10 Year Investment in Exxon Mobil
Let’s take a look and see how you would have fared if you invested $5,000 in Exxon Mobil stock exactly 10 years ago. On April 24, 2003 you would have been able to purchase roughly 142 shares of Exxon Mobil for $4,988.46 at a closing price of $35.13. The most recent closing price of XOM was April 24, 2013 when XOM closed at $89.43. Today your 142 shares would be worth roughly $12,699.06 for a return of 154.6% or a compound annual growth rate of 9.79%.
Exxon Mobil performed pretty well over the past decade for investors offering an annual return slightly below 10%.
While market returns have been good over the past 10 years, lets not forget about the dividends you would have received during those 10 years as well. Over the course of the past 10 years you would have received a total of $2,151.30 in dividend income. This means that your total return over the past decade of owning Exxon Mobil stock has been 197.7% or 11.53% compounded annually. Through a decade when many claim the stock market has been dead money, Exxon Mobil has almost doubled our money. This has been a great investment through the past decade for owners.
So over the past decade while owning Exxon Mobil shares you have enjoyed a 11.53% compounded annual return. You have been paid in cash dividends $2,151.30. You could have used that dividend income to pay some bills, travel, attend sporting events, donate to charity or anything else you’d like. Or you could have reinvested those dividend payments and your total return would have been even better. XOM was a great investment for dividend growth investors over the past decade.
A 20 Year Investment in Exxon Mobil
A 10 year investment in Exxon Mobil was pretty good for shareholders. How about a 20 years investment? Lets take a look at how you would have fared had you invested roughly $5,000 in Exxon Mobil stock 20 years ago. On April 24, 1993, XOM stock closed with a price of $64.25. You would have been able to buy 77 shares for a total price of $4,947.25. Since that date there were two 2 for 1 stock splits. Today you would have a total of 308 shares worth a total value of $27,544.44. This would give you a return of 456.8% or 8.96% compounded annually.
Once again don’t forget about all the dividend income you would have received over the past 20 years by just owning your Exxon Mobil shares. Over the past 20 years you would have received a total of $7,193.34 in dividend income from Exxon Mobil. This means that your total return over the past 2 decades of owning XOM stock has been 602.2% or 10.24% compounded annually.
So a 20 year investment in Exxon Mobil earned you a total return of 10.24% compounded annually. You would have received $7,193 in dividend income to either offset your expenses or reinvest in the company. Had you reinvested in more Exxon Mobil stock your returns would have been even better.
Exxon Mobil would have been a pretty solid investment over the past decade and 2 decades for those who purchased shares in the company. It is interesting that a fairly boring company operating in the oil industry can be such a great investment for dividend growth investors. They have been growing their dividend for 30 years in a row. This exercise has shown just one more example of a how investing in dividend growth stocks has turned out pretty good for investors following this strategy.
I want to point out that I am not taking into account the company’s valuation 10 or 20 years ago. I am merely looking at how you would have fared if you had purchased the stock exactly 10 or 20 years ago. If the company was overvalued at the time of your purchase, your returns will generally be lower. If the company was undervalued at the the time of your purchase, returns generally will do well. Stock valuation at the time of purchase is one of the most important things to take into consideration. Even a great investment will not turn out great if you pay too much for it.
What do you think? Do you own Exxon Mobil stock? Would you have been happy with these returns over the past couple decades? Where do you see this company going in the future?
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