As a long time holder of XOM since the 1970's, a few observations may be beneficial. The current dividend yield is at the very low end of the historical yield range. the current dividend of $1.60 represents only 1.9% yield. Assuming a 8% compound dividend increase, the dividend would be $3.45. This dividend after 10 years of growth would yield about 4% at the current price which is about $9 under the historical high stock price. This does not bode well for the stock if oil prices are peaking.
Bottom line ... this is a hold for long-term investors ... not a buy for new money.
How funny; I bought XOM just before the Valdez. bought it for my eight-year-old daughter. She came home from school one day upset that we owned XOM after she heard about the Valdez. At least she was aware of the world around her, even though her teachers were typical liberal teachers.
I have same dilemma as you. What do you do. Okay, first thing, look today. The market is down 350 points and XOM hardly moved. No one wants to sell their oil stocks. The analogy is autos; people are off-loading their gas guzzlers as fast as possible; gas guzzlers are losing their value precipitously, where as hybrids are gaining value on the used market.
Therefore, same with stocks. People can't get rid of non-oil stocks fast enough; they're all losing value. But they're holding on to their energy stocks.
But with huge drop today, watch what the market does -- if it looks like there is still more to drop, wait -- but when you think it's near the bottom -- then sell some of your XOM (capital gains will be much higher under No-Bama) and buy almost anything else -- things are so beat down.
If you are well diversified, you may want to hold onto XOM. I think oil stocks are going to be the "talk of the town" for the next couple of years. I think you will be more comfortable when a) XOM has sold their US retail business (note, XOM will not sell overseas retail); when XOM sells stateside refineries; c) when XOM incorporates in Dubai to avoid No-Bama and windfall profits tax.
However, you may be a XOM long-term investor, but you have not done your homework regarding buybacks benefit, choosing to ignore that within the next 10 years, XOM might reduce its outstanding shares by anywhere between 25% to 35% or so from today's level. Are you implying a lower number of outstanding shares will not help EPS to go higher, and by extension the stock price as well.......?
A little math exercise : assuming a constant absolute profit level, if you reduce outstanding shares by 35%, EPS will not grow 35%, but by 53.85%.
It is really unfortunate how some shareholders ignore the HUGE benefits of buybacks. Please do the math before giving a wrong analysis.
I can't argue with either of you. Things will help XOM a lot when they a) sell of all their retail store by end of 2009; b) sell their refineries stateside; c) prepare for Dubai incorporation; d) incorporate in Dubai is i) No'Bama is elected, and/or ii) windfalls profits tax implemented.
XOM is run by some smart, and business-hardened (read: ruthless) executive (look how they took control of 67% of FO.V's Hungary natural gas acreage) and XOM will do just fine.
I'm not sure if I would put new money in XOM quite yet -- watch it closely - it could go lower in short term, but long term -- 2- 5 years, it should perform better than it has in the last couple of years. Need to get rid of those non-performing retail stores and incorporate in Dubai.