Just a year ago, crude oil above $110 seemed like a remote possibility. Fast-forward to the present day, and high fossil-fuel prices are a reality that investors must adjust to. It will weigh on the bottom lines of many companies, but Exxon Mobil (NYSE:XOM) stock holders are poised to benefit from rising energy prices.
This isn’t to suggest that Exxon Mobil’s profitability depends entirely on fossil fuels. As we’ll discover, the company has significant interests in reduced-emissions opportunities.
But there’s no denying that higher fossil-fuel prices have helped to lift the Exxon Mobil share price. However, it’s not too late to buy the stock, as its value proposition is still compelling.
What’s Happening with XOM Stock?
It’s no secret that the energy sector has generally outperformed many market sectors in 2022 so far. Russia’s invasion of Ukraine has started a chain of events that pushed oil and natural gas prices to short-term highs. As a result, XOM stock rallied from $63 at the beginning of the year, to over $100 recently.
Geopolitical turmoil, if it persists, could provide a floor for fossil-fuel prices and a backstop for the Exxon Mobil share price. Like it or not, investors must adapt to energy-price inflation, and should consider favoring assets that could gain value in this challenging environment.
Still, the powerful rally in XOM stock might worry some value-focused investors. It shouldn’t be a cause for concern, though. Exxon Mobil’s trailing-12-month price-to-earnings ratio of 15.2 suggests that there’s still a terrific value here.
Besides, Exxon Mobil pays a forward annual dividend yield of 3.4%. This is a nice bonus for the company’s long-term shareholders.
Keeping It Clean
Remember, we’re talking about a company that earned $5.5 billion in 2022’s first quarter. Exxon Mobil has the ability to pay generous dividends while also funding its fossil-fuel endeavors and its clean-energy initiatives as well.
Thus, even if the oil price pulls back, Exxon Mobil is well capitalized and can withstand fuel-price volatility. Moreover, the company is leading the way in pursuing alternatives to fossil fuels, so it’s not wholly dependent on oil and natural gas revenue.
To provide an example of this, Exxon Mobil cited the company’s “plans for a world-scale blue hydrogen plant supported by one of the world’s largest carbon capture and storage projects in Baytown, Texas” in a recent press release.
In addition, the company announced an exciting agreement with Pertamina, Indonesia’s state-owned energy company. Together, Exxon Mobil and Pertamina will advance “lower-emissions technologies, including carbon capture and storage and hydrogen production.”
What You Can Do Now
In uncertain times, Exxon Mobil offers tremendous shareholder value and generous dividends. It’s a well-capitalized industry giant with interests in fossil fuels but also in alternative energy sources.
So, there’s no need to be concerned about XOM stock after its impressive rally. There’s still room to run as Exxon Mobil continues to solidify its position as an energy-market leader.
— Louis Navellier and the InvestorPlace Research StaffRetire Early With $3 Wonder Stock? [sponsor]
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Source: Investor Place