The Best Energy Stock to Hold in Uncertain Times
Key Points
Investing in the energy sector is volatile by nature and prone to big price swings in oil and gas prices.
To minimize that impact, investors should consider owning large, diversified, global energy producers that provide the most stable results.
A predictable and growing income stream is also an important consideration for long-term success in the sector.
- 10 stocks we like better than ExxonMobil ›
One of the most important things investors considering a stake in the energy sector need to know is that it is highly sensitive to macroeconomic cycles and swings in oil and gas prices.
With that in mind, and relative safety within the sector seen as a priority, then it makes sense to consider a large, stable, globally diversified and integrated energy business like ExxonMobil (NYSE: XOM). The Texas-based multinational giant has proven its ability to navigate challenges since it was founded in 1870, as well as a long history of returning profits to shareholders.
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Why ExxonMobil?
For starters, few energy producers in the world can match Exxon's size, scope, and diversification, starting with its $500 billion market cap and over $325 billion in annual sales -- both of which lead all 21 of its peers in the Energy Sector Select ETF.
There's also Exxon's mix of businesses, including "upstream" exploration and production operations, as well as its "downstream" refining, marketing, and petrochemical products. It's a combination that gives the company some cushion from fluctuating commodity prices compared to smaller players.
Image source: Getty Images.
Lastly, there's Exxon's dividend and share buyback program, which saw $4.2 billion of dividends and another $5.1 billion of stock repurchases take place in Q3 alone. Additionally, the company announced that it had increased its dividend for the 43rd consecutive year. As a result, ExxonMobil maintained its coveted spot as the largest of just two energy sector companies (the other is Chevron) currently included in the ProShares S&P 500 Dividend Aristocrats® ETF (Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC), a portfolio of stocks that have all raised their annual payout for at least 25 consecutive years.
In summing up the company's latest quarterly results, ExxonMobil chairman and CEO Darren Woods perhaps said it best: "No one else in our industry is executing at this scale, with this level of innovation, or delivering this kind of value."
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Matthew Nesto has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and ProShares S&P 500 Dividend Aristocrats ETF. The Motley Fool has a disclosure policy.
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