Renewable energy sources, including wind and solar, have experienced significant growth over the past few decades, becoming a major contributor to the world's energy needs. But don't let anyone tell you that oil and gas companies are dying. The reality is far from it. Research by The Motley Fool laid out today's energy landscape, and virtually every single one of the world's largest energy companies by market cap deals in fossil fuels.
It may not always be this way, but it's a clear sign that oil and gas have plenty of life left for long-term investors. ExxonMobil (XOM 2.22%) is the largest U.S. company, a behemoth with a staggering $440 billion market cap.
Is the stock a good buy right now? Here is what you need to know.
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An industry stalwart you can buy and hold through adversity
ExxonMobil is an integrated oil and gas company, meaning it diversifies its business across exploration, refining, and distribution. Its diverse operations, along with its massive size and scale, help the company endure hardship when oil and gas commodity prices drop to unprofitable levels. ExxonMobil's dividend streak is the most glaring proof of this. The company has paid and raised its dividend for 42 consecutive years.
Very few companies in any industry have accomplished this, let alone the energy sector. Five years ago, the COVID-19 pandemic abruptly turned the world on its head, sending oil prices below zero for the first time. Not even that stopped ExxonMobil from raising its dividend.
Today, ExxonMobil could be in its best financial standing in recent memory, ready for what the future holds. The company has a sterling AA- credit rating from S&P Global, well into investment-grade territory. Additionally, ExxonMobil has $17 billion in cash on its balance sheet and debt amounting to just 8.3% of its assets, its lowest level in over 10 years.
ExxonMobil may not be an exciting business, but it's the rare energy stock you can buy and hold without losing a wink of sleep.
Drilling for growth and cash
The energy giant has shifted gears to drive growth over the next five years. First, ExxonMobil acquired Pioneer Natural Resources in a $64.5 billion (enterprise value) all-stock transaction that closed in May 2024. The merger expanded ExxonMobil's footprint in the Permian Basin, an oil-rich region in the Southwestern United States.
Management believes that growing production in profitable regions, such as the Permian Basin and Guyana, combined with cost-cutting measures, will help ExxonMobil increase earnings by $20 billion, cash flow by $30 billion, and generate a cumulative $165 billion in cash by 2030.
It's an ocean of capital that would enable the company to invest in its core business, build new revenue streams outside of oil and gas, repurchase shares, and, of course, continue to raise its dividend.
NYSE: XOM
Key Data Points
These goals could change if oil and gas prices fall for an extended period. However, management clearly believes the company will continue to grow profitably. Plus, the Trump administration supports the oil and gas industry, so ExxonMobil shouldn't face much political pushback anytime soon.
Is the stock a buy?
ExxonMobil stock offers a solid foundation for investment returns, with its dependable 3.9% dividend yield. From there, 5% to 6% annualized growth could deliver 9% to 10% total returns, on par with what the broader stock market averages in a typical year. That seems pretty achievable, given ExxonMobil's 2030 financial targets. Currently, analysts predict that the company will grow its earnings by an average of 9.6% annually over the long term.
It's always tricky to gaze too far into the future with energy companies, so it's best to temper expectations. The good news is that if the energy sector does falter, ExxonMobil is arguably the safest oil and gas stock you could ask for.
No, a $440 billion company isn't going to make you a millionaire overnight. Still, ExxonMobil is worth buying for anyone looking for stability, solid growth prospects, and a meaningful dividend from the jump.
