ExxonMobil (XOM -0.26%) is one of the world’s largest energy companies, with an asset portfolio that spans the globe. Devon Energy (DVN -0.29%) is a comparatively small energy company that produces only oil in the United States. They are basically two extremes in the same industry, with one likely to benefit more from high oil prices than the other. But that may not be the best way to pick between the two for your portfolio. Here’s why.
What does ExxonMobil do?
Exxon is an energy industry giant, with assets spread across the entire energy value chain, from the upstream (production) to the midstream (pipelines) to the downstream (chemicals and refining). Its portfolio of assets is also globally diverse, with operations in most of the world’s key energy-producing and using regions. It is kind of a one-stop shop for investors looking to get into the energy sector.
Image source: Getty Images.
The best part, however, is that Exxon has a long and successful history of navigating the historically volatile energy sector’s ups and downs. The primary example of its success is actually the dividend, which has been increased annually for 43 years despite often material oil price swings. Add in a well-above-market 2.5% dividend yield, and conservative dividend investors should probably find Exxon to be an attractive option in the energy patch. In fact, it is a solid choice most of the time. That said, the overarching story here is that Exxon’s massively diversified business helps to soften the peaks and valleys in the energy sector.
ExxonMobil
Premium Feature Moneyball Superscore 70/100
Today’s Change
(-0.26%) $-0.43
Current Price
$164.05
Key Data Points
*:nth-last-child(-n+2)]:border-b-0″>
Market Cap
$676B Market cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.
Day’s Range
$163.46 – $166.86
52wk Range
$110.39 – $176.41
Volume
9.5M
Avg Vol
14.1M
Gross Margin
20.88%
Dividend Yield
2.50%
What does Devon Energy do?
Devon is playing a very different game, since it operates only upstream and drills only in the U.S. market. It is basically a shale oil specialist. When oil prices are high, the company will gush with cash, which means today’s high oil prices are a big win. If you are trying to play the rise in oil prices, largely driven by the geopolitical conflict in the Middle East, Devon Energy is likely to benefit more than Exxon.
Devon Energy
Premium Feature Moneyball Superscore 74/100
Today’s Change
(-0.29%) $-0.14
Current Price
$47.88
Key Data Points
*:nth-last-child(-n+2)]:border-b-0″>
Market Cap
$53B Market cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.
Day’s Range
$47.40 – $48.93
52wk Range
$31.47 – $52.71
Volume
5.6M
Avg Vol
11.1M
Gross Margin
27.09%
Dividend Yield
2.33%
However, that’s just one side of the energy coin. If history is any guide, oil prices will eventually come back down. And that will hurt Devon’s upstream-focused business more than it will hurt Exxon’s more diversified business. If you are looking to add long-term energy exposure to your portfolio, you’ll probably be better off sticking with a diversified giant like Exxon.
Your investment goal should determine the energy stock you choose
The truth is that Exxon and Devon are both historically well-run companies. But they do very different things. Exxon is built to reward investors through the entire energy cycle, while Devon rides the wave, with its stock generally rising and falling just as dramatically as oil prices. If you are a long-term investor, Exxon is probably the better choice. If you are looking to ride the energy wave, Devon will likely be more attractive to you.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
