Oil and gas exploration and production (E&P) isn't an easy business. It requires massive amounts of investments, and the earnings and cash flows of E&P producers are directly exposed to the volatility in oil and gas prices.
Yet ExxonMobil (NYSE: XOM) -- the largest oil company in the U.S. -- has performed remarkably well over the decades, and its stock has generated rich returns for shareholders. In recent years, ExxonMobil has cut costs, expanded production capacity, grown its cash flows steadily, and increased its dividend years after year, all of which have been reflected in its share price.
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If you'd invested $10,000 in ExxonMobil stock five years ago, you'd have more than doubled your money to $24,200 by now, as of this writing. Even better, your investment would have tripled to nearly $30,600 today if you'd reinvested the dividends.
XOM data by YCharts
Between 2019 and 2024, ExxonMobil saved more than $10 billion in costs, grew its earnings by over $15 billion, and added over $20 billion in cash flow from operating activities (CFO). The net result? The oil and gas giant returned nearly $140 billion to shareholders in the form of dividends and share repurchases over the period. Not surprisingly, ExxonMobil's stock price has appreciated steadily over the past five years or so.
ExxonMobil has even bigger growth plans for the foreseeable future. The oil major acquired Pioneer Natural Resources in an all-stock deal worth $60 billion in 2023 and is trying hard to reduce its break-even price so that it can make money even at low oil prices. ExxonMobil believes it could add another $20 billion in earnings and nearly $30 billion in CFO by 2030.
That should also mean bigger dividends -- ExxonMobil has increased its dividend for 42 consecutive years now and yields 3.6%. Steady earnings, cash flow, and dividend growth should continue to propel ExxonMobil stock higher in the long run.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.