As detailed in another article on Benzinga, long-term investors should applaud the falling price of oil. The main exchange traded fund for oil, United States Oil (NYSE:USO), is down in recent market action. So are the stock prices for Big Oil Stocks such as ExxonMobil (NYSE:XOM) and Royal Dutch Shell (RDS-B), the two biggest in the world.
Here are three reasons why long-term investors should be pleased with ExxonMobil declining in price.
It could allow for getting in at a cheaper price than Warren Buffett. The legendary investor bought 40.1 million shares last year for $3.45 billion. Needless to say, after that was announced, the stock price for ExxonMobil rose. But now it is drifting back to that level. As ExxonMobil is down for the last week, month, and quarter, there is certainly downward momentum. It is always nice to get in cheaper than "The Oracle of Omaha."
ExxonMobil is the biggest oil company in the world.
Like Jules in Pulp Fiction who was pretty much a vegetarian because his girlfriend was one, being the biggest pretty much makes ExxonMobil the best oil company, too. There is a critical mass needed for oil firms to operate globally, especially in emerging market countries where most of the growth will be for the future. ExxonMobil has that with a market capitalization of around $425 billion (second biggest in the market). The biggest and the best in an industry that is vital to the world's economy is now trading at a lower price: that is a very good thing for long-term investors!
The more the stock price decreases, the more the dividend yield for ExxonMobil increases.
When the price of a stock falls, the dividend yield becomes that much higher. At present, the dividend yield for ExxonMobil is more than 2.8 percent. The average dividend yield for a member of the S&P's 500 Index is around 2 percent. ExxonMobil is also a "Dividend Aristocrat," which means it has increased its dividend annually for at least 25 consecutive years. Due to the decline in its stock price, long-term investors are now rewarded by a high yield from a dividend that should grow over time, based on its history.
As it is impossible to time the market, do not try to anticipate when ExxonMobil will hit bottom. Buy for the long term. The dividend yield of ExxonMobil pays for shareholders to wait for the stock price to rebound.
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