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.

Conclusion

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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8 Responses to An Investment in Exxon Mobil Stock

  1. Hi Dan. Though I don’t currently own shares of XOM, it’s on my radar. XOM is a great company generating enormous amounts of cash.

    It’s always interesting to see how a stock would have return over the last 10, 20 years. Though past results are no guarantee of future returns, looking at past returns brings a long term perspective that we sometimes forget. After all, dividend investing is a lon-term endeavor. That being said, I would love to own a stock that returns about 10% on average. Personally, I prefer a steady 10% than a roller-coaster.

    As for XOM, the last time I checked, the yield was a bit too low for me. However, it seems the yield is now in a more interesting range (~2.5%). I’ll take a closer look.

    Thanks for the analysis.

    • Dan Mac says:

      Thanks Dividend Engineer. I also don’t currently own XOM but it is on my want list. I like all 3 of the domestic big oil companies being CVX, COP and XOM. Next time I’m ready to buy an oil company I’ll have to do an analysis to compare the 3 to decide which to buy. But eventually I’d like to own all of them.

      I like to do these 10 and 20 year look backs to show examples of how owning these stocks actually turned out. In almost every case I have looked at, investors would have earned fairly solid returns over the years by investing in these dividend growth stocks. I know past results doesn’t guarantee future results but I feel my chances are pretty good that I’ll be happy with my investment portfolio 15 to 25 years from now if I stick with my plan!

  2. I think XOM is offering a pretty decent entry point right here for long term investors. I’ve been thinking about adding XOM and CVX to my portfolio very soon.

    • Dan Mac says:

      I haven’t really had a chance to currently analyze XOM to decide on valuation but I feel like you definately can’t go wrong picking up shares of these dominating oil companies for the long term. As long as they aren’t overvalued (which from a quick glance they aren’t) this would probably turn out to be a good pick up.

  3. [...] Mac had a nice recap of investing in Exxon Mobil. What Dan shows in his post, is how you would have done if you invested in this giant oil company [...]

  4. Ben says:

    It’s always interesting to see the long-term benefits of investing in cash rich dividend companies like Exxon. Philip Morris is another one that has similar characteristics over a longer time frame. Compounding and quality companies can lead to good things with your returns.

    • Dan Mac says:

      I totally agree Ben. I find these exercises so interesting because some of the most well known companies that most find boring to invest in and certainly not cocktail party conversation starters usually offer some great returns for those who decided to invest anyways regardless of thier “sex appeal”.

  5. [...] An Investment in Exxon Mobil Stock @ Dividend Growth Investing [...]

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