Should You Buy ExxonMobil While It's Below $115?

ExxonMobil (NYSE: XOM) shares have seen a decline of approximately 10% from their peak following the pandemic, resulting in a current price just under $115 per share. This raises the question: is now the right time to invest in this energy giant, or should investors hold off for a potentially better buying opportunity? Let's explore both sides of the argument.

Understanding ExxonMobil's Business

Before deciding if it’s wise to purchase ExxonMobil below $115, it’s essential to comprehend what the company does. ExxonMobil is one of the largest integrated energy corporations globally, boasting a remarkable market capitalization of around $475 billion. Its business strategy relies heavily on diversification.

ExxonMobil is engaged in the production of oil and natural gas from multiple onshore and offshore locations. It further transports these resources through its extensive midstream systems, and processes them at its various chemicals and refining facilities.

With operations spanning the globe, Exxon's exposure is not only diverse across energy sectors but also wide-ranging geographically. This global presence helps cushion the company against the inherent volatility of the energy market.

Reasons to Buy ExxonMobil Now

Exxon is designed to navigate fluctuations in energy prices, which is evident through its resilient business model and robust balance sheet.

The company maintains a low debt-to-equity ratio compared to its peers, enabling it to acquire more debt during tough times to sustain operations and continue paying dividends. When energy prices rebound, Exxon can reduce its leverage in anticipation of the next market cycle.

This strategy is evidenced by Exxon's impressive track record of 42 consecutive years of increasing annual dividends. For those considering investment in today's energy landscape, Exxon appears to be a reliable choice. Given the current geopolitical tensions, the company could serve as a safe harbor during periods of oil price volatility.

Reasons to Wait Before Buying ExxonMobil

Conversely, if you're not actively seeking energy investments at this moment, it may be prudent to hold off on purchasing ExxonMobil. The company’s strong business model and reliable dividends present an interesting dilemma. When looking at historical trends, it's clear that Exxon's yield tends to increase as its share price declines. This is simply how dividend yields work, but it highlights a critical aspect of investment timing.

Operating in a notoriously volatile industry, Exxon has crafted a business model that withstands the unpredictable nature of oil and gas prices. Given its history of consistent dividend growth, investors could potentially secure a better deal if they wait for a significant downturn in the industry.

Currently, the 3.6% yield is appealing but significantly lower than historical highs. A yield around 5% or above would represent a far more attractive entry point. Achieving this may require strategic buying during a broader industry sell-off, which can be challenging to execute. However, planning ahead to buy Exxon in a downturn can improve the likelihood of successful investment.

Final Thoughts: Buy Now or Later?

Overall, ExxonMobil is well-managed and could be a solid addition for those wanting energy exposure at today’s pricing. However, there have been moments when the stock was priced lower and offered higher dividend yields. As uncertainty looms over the energy market, Exxon may prove to be a stable option during turbulent times or a desirable stock to keep on your watch list for future opportunities.

Investment decisions should be based on thorough analysis and personal financial circumstances.

ExxonMobil, Investment, Energy