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Dividend investing is coming back into the spotlight as investors prepare for a scenario of higher and longer interest rates amid high inflation and volatility. Why do investors flock to dividend stocks when yields are high? An analysis of World X shows that high-dividend stocks outperformed the S&P 500 by about 3% per year between 1960 and 2017. They also outperformed the broader market during seven of the ten periods of rising interest rates since 1960.
In this environment, investors are looking for large companies with strong track records of dividend growth and strong balance sheets. Exxon Mobil Corp. (NYSE:XOM), with 41 consecutive years of dividend increases, is one of the most popular dividend stocks among income investors. In this article, we’ll learn how to make at least $500 a month with ExxonMobil, but first let’s look at the latest buzz around the stock.
ExxonMobil shares are up about 10% so far this year. Goldman Sachs recently included the stock in its list of highly liquid companies. The firm noted that investors are willing to pay a premium for stocks with strong liquidity because of their low trading costs and the “flexibility” they offer in different environments. Last month, Morgan Stanley began covering the stock with an overweight rating and a $145 price target. Devin McDermott, an analyst at Morgan Stanley, noted that the stock trades at a 55% discount to the broader market, despite growing cash flow per share 50% higher than the S&P.
How much should I invest in XOM to earn $500 per month in dividends?
Exxon Mobil Corp currently pays a quarterly dividend of $0.95 per share or an annual dividend of $3.80 per share. The stock closed the June 7 trading session at $112.75.
A $500 dividend income from ExxonMobil would mean you would earn $6,000 per year. To find how many shares you need to own to achieve this income, we will divide this annual income by ExxonMobil’s annual dividend per share.
Number of actions needed = $6,000/$3.80 = 1,578.94
The total investment needed to earn $500 per month from XOM: 1,579 shares X $112.75 (the price per share of XOM)
=$178,032
To earn $500 per month from ExxonMobil, you need to own 1,579 shares of XOM stock based on the June 7 closing price. This would represent a total investment of approximately $178,032.
What about $100 a month?
Let’s revise our goal to just $100 per month in dividend income and calculate the required investment amount.
An income of $100 per month means $1,200 per year.
Let’s calculate the total number of XOM shares you would need to buy to earn $100 per month:
$1,200/$3.80 = 315,789 shares.
This means that to earn $100 per month in dividends from ExxonMobil, you would need to purchase approximately 316 shares of the company, which would cost $35,629.
ExxonMobil Dividend Analysis
Over the past five years, ExxonMobil’s annual dividend growth rate was 2.20% per year. At the end of the first quarter, the stock’s payout ratio was 46%, well below the industry average of 66%. During the first quarter, the company generated $14.7 billion in operating cash flow, while its free cash flow was $10.1 billion in the first quarter. The company paid $3.8 billion in dividends and completed $3.0 billion worth of stock repurchases. The average price target set by Wall Street analysts for XOM is $132.88, which has approximately 17% upside potential from the June 7 closing price.
Are you missing out on higher returns?
The current high interest rate environment has created an incredible opportunity for income-seeking investors to achieve massive returns, but not through dividend stocks… Some private market real estate investments give retail investors the opportunity to capitalize on these high yield markets. opportunities and Benzinga identified some of the most attractive options to consider.
For example, the investment platform backed by Jeff Bezos has just launched its Private credit fund, which provides access to a pool of short-term loans backed by residential real estate with a net annual return target of 7% to 9% paid monthly to investors. The best part? Unlike other private credit funds, this one has a minimum investment of just $100.
Arrived VP of Investments Cameron Wu explains the new Private credit fund
Don’t miss this opportunity to take advantage of high yield investments while rates are high. Check out Benzinga’s favorite high-yield deals.
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