We recently compiled a list of the 10 Undervalued Dividend Aristocrats To Buy According to Hedge Funds. In this article, we are going to take a look at where Exxon Mobil Corporation (NYSE:XOM) stands against the other undervalued dividend aristocrats to buy according to hedge funds.
A dividend aristocrat is an S&P 500 company that not only maintains regular dividend payments to shareholders but also increases its payouts annually. To qualify as a dividend aristocrat, a company must raise its dividends consistently for at least 25 consecutive years.
Michael Clarfeld, Portfolio Manager at ClearBridge, recently talked about why companies that consistently grow their dividends are well-positioned to handle the challenges of 2025. With rising costs, tighter margins, higher interest rates, and inflation on the horizon, Clarfeld is still optimistic about the economy. He pointed to strong employment numbers, upbeat consumer sentiment, and confident businesses, especially after the election. Pro-business policies under the Trump administration could drive investments and growth, which sounds great, but there’s a catch. For instance, bringing manufacturing back to the US would create jobs and boost wages, but it could also increase business costs. After two strong years, Clarfeld doesn’t see much room for big capital gains in 2025. Plus, with inflation sticking around, the Federal Reserve is likely to take a more cautious approach. That said, he sees opportunities in sectors like European and global consumer staples and US energy infrastructure.
Clarfeld is a big fan of dividend growth stocks, calling them a timeless investment. They can act as a safety net during volatile markets and provide steady income, which is especially useful when capital appreciation feels out of reach. He also highlighted how dividends help protect your purchasing power by keeping up with inflation. In his view, dividend growth is a smart and reliable strategy for navigating a potentially bumpy 2025.
Paul Baiocchi of SS&C ALPS Advisors sees dividend investing as a smart move, expecting the Fed to ease rates. According to Baiocchi, investors are shifting from money markets and fixed income to dividend-paying stocks, especially companies with leverage that could benefit from lower interest rates. Similarly, Mike Akins of ETF Action also sees dividend ETFs as a defensive play, highlighting that the companies included typically have strong balance sheets. He notes the growing popularity of dividend-focused ETFs, suggesting that consistent dividends give investors confidence in a company’s stability and financial health. Both experts agree that dividends offer a sense of durability and drawdown protection in uncertain markets.
A refinery, the sun illuminating its engineering complexity.
In this article, we selected stocks from the Dividend Aristocrats List that had a P/E ratio below 20 as of December 23. Our focus was on identifying stocks with the strongest hedge fund sentiment in Q3 2024 among the 66 Dividend Aristocrats that also met our P/E criteria. The stocks are ranked below in ascending order based on the number of hedge fund holders for each company.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Dividend Yield as of December 23: 3.74%
Number of Hedge Fund Holders: 86
P/E Ratio: 13.16
Exxon Mobil Corporation (NYSE:XOM) is a global energy leader involved in exploring and producing crude oil and natural gas. Exxon Mobil Corporation (NYSE:XOM) and Mitsubishi Corporation have recently partnered on a low-carbon hydrogen and ammonia project at ExxonMobil’s Baytown, Texas facility. The project, expected to start in 2029 pending approvals, aims to capture 98% of CO2 emissions, producing up to 1 billion cubic feet of hydrogen and 1 million tons of ammonia annually.
Exxon Mobil Corporation (NYSE:XOM) reported Q3 earnings of $8.6 billion, highlighting the success of its transformation efforts. The Energy Products business has doubled earnings since 2019, driven by cost reductions, strategic investments, and optimized operations. The company has streamlined its refinery portfolio, prioritizing high-value sites, and improved product yields through advanced facilities like the Rotterdam Hydrocracker. XOM’s cost savings have reached $5 billion since 2019.
Despite market fluctuations, diversification in geography and products stabilized earnings, with gains in gas and specialty product margins. Exxon Mobil Corporation (NYSE:XOM) also increased its dividend by 4% to $0.99 per share, marking 42 years of consecutive growth. Upstream production rose 24% to 4.6 million barrels per day, with unit earnings doubling to $10 per barrel. The integration of Pioneer added 770,000 barrels per day, enhancing efficiency and sustainability.
Exxon Mobil Corporation (NYSE:XOM) is a favored energy company among hedge funds, with 86 funds holding long positions in the stock.
Overall, XOM ranks first on our list of the undervalued dividend aristocrats to buy according to hedge funds. While we acknowledge the potential of XOM to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
