Two Dividend Aristocrats for Your Portfolio

Loading up on a dividend aristocrat that is undervalued will more often than not lead to sensational returns. As of now, the company that fills the bill perfectly is ExxonMobil (XOM). Exxon is trading at a historically cheap valuation, and investors should consider adding it to their portfolios to make the most of the rebound in crude oil prices. Exxon has increased its dividend every year since 1983 and in the reference period crude oil has crashed roughly six times. Clearly, Exxon is well equipped to ride any crash, and long-term investors will be rewarded with great returns.

What makes the investment even more lucrative is the fact that Exxon has a generous dividend yield of 3.8%.

So, investors can enjoy great dividends while waiting for a rebound in oil prices. Crude oil has staged an impressive recovery in the last few weeks, but it is still a lot lower than the last year’s level. Thus, I believe that crude has room to run higher, which will eventually push the share price of oil giants higher. Another stock that I think investors can consider adding to their portfolios is Chevron (CVX). Chevron also has a high dividend yield of 5.09% and will definitely move higher with the increase in crude oil prices.

The primary reason why I think crude oil will recover in the coming months is the increase in demand. Lower oil prices have considerably increased crude oil consumption, and this will likely boost crude prices in the long-haul. Also, according to a recent EIA report, crude production in the U.S. is expected to decline. The firm said:

“"Expected crude oil production declines from May 2015 through mid-2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions,"

Falling production will counter the oversupply that has plagued the energy sector for over a year and will eventually boost crude prices. In addition, insiders have upped their stakes in respective companies and this is another vote of confidence for long-term investors. Even if crude oil touches $70 per barrel mark, which will still be 40% than last year’s highest levels, it will represent a 40% uptick from present levels. Exxon and Chevron will definitely benefit from such a massive boost in crude prices. Investing in these two dividend aristocrats is a no-brainer at this point of time as both the stocks are trading at a historically low valuation.


Crude oil has staged an impressive recovery, and there are many signs indicating that this trend will continue. Although both Exxon and Chevron are up considerably since bottoming, the stocks hold huge upside potential. Moreover, the impressive dividend yield makes betting on a recovery even more lucrative. Given the increasing demand for oil and increasing insider buying, I believe that oil prices have finally started to stabilize and should move up in the coming months. So, investors should add Exxon and Chevron to their portfolios to benefit from the expected recovery of crude oil.

Published on Oct 13, 2015
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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