While helping a 92-year-old relative with her estate planning last week, I discovered that she receives dividend checks from ExxonMobil mailed to her every quarter. I also discovered she was an early retiree herself, retiring at age 50 with a government pension and these Exxon shares. What a long retirement! She has the literal mailbox money that Jack Bogle was talking about!
I went home and ran some quick numbers. I’m not going to disclose how much she owns, these are just some round numbers. In 1980, the Exxon quarterly dividend averaged 8.45 cents per share. As of 2019, the quarterly dividend has grown to 87 cents per share. (Thank you Divdata.com.) That means that the dividend has grown roughly 10X in the last 40 years, roughly 6% annualized. That’s if you spent the dividend every 3 months without any reinvestment at all and completely ignoring any increase in the share price!
That means if she was cashing checks for $1,000 a year in annual dividends in 1980, she’d have all that income for 40 years while still cashing checks for $10,000 a year today. ExxonMobil is a Dividend Aristocrat, which means it has raised dividend payouts for 25 consecutive years or more. (It’s actually raised dividends every year for the last 37 years.)
This was even greater coincidence because just a week earlier, I had bought additional ExxonMobil (XOM) shares in my “Fun Money” account – my only individual stock purchase so far in 2020. The XOM share price has been struggling in the short-term, due to a variety of reasons (lots of natural gas = low crude oil prices, large reinvestments = low free cash flow, etc). However, I believe it to be cyclical and haven’t seen any reason to doubt its long-term prospects. If somehow we discover a cheap, limitless source of energy that makes oil worthless, I would happily take that win for society and see my Exxon holdings go to zero.
This is not meant as a recommendation to buy ExxonMobil stock, as my Fun Money account is more of an educational tool for myself and someday my children. I want them to understand that stocks are parts of real businesses. This story about their favorite great-grand-auntie will be a great reminder that while the news is often scary, we can’t forget the benefits of a long-term perspective.
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to bad she wasnt dripping this but its all good . Money is money
If she had a DRIP she’d certainly be looking at a big ole’ pile of money. But then she wouldn’t have had that income for 40+ years. At her age looking back, I’m glad she spent it.
If Bernie wins in Nov, one of his loony plans is to sue Big Oil to pay for part of his ‘free stuff’. XOM shares will take a big hit if he wins, or maybe the recent struggling you refer to is already starting to take that into account.
I don’t think asking companies to pay for the negative externalities they create is a “loony” idea. But yes, definitely something to keep in mind investment wise at this time
Exxon has been pushing hard on marketing the last few years to rid themselves of the misconceptions seen above that their past is their future. Exxon is an energy company, not an oil company. Rest assured Exxon is investing heavily in alternative energy sources. If oil goes to zero, they will know it long before the public does and if they are as good as they should be, they will have already adjusted and be “winning” at business in another related sector. Their stock and dividends have not gone up for 37 years because oil has (it hasn’t); they’ve increased their business consistently by being very good at the business of energy.
I’d recommend investing in one of the European oil Majors instead of XOM because they seem to understand that they will need to transistion away from oil/gas over time. BP, Total, RDS, and Equinor all offer similar global reach and vertically integrated operations, but are using some of their current cashflows to expand into renewables, whereas Exxon and Chevron are not. I think thats going to leave them with more stranded assets if they don’t start soon.
Also Shell’s dividend as an example is over 7%!
I own RDS and BP as well. I like to buy whichever one has the worst sentiment in the short term.
(Added: Again this is only a small part of portfolio. Vast majority in index funds, which simply owns a bunch of oil stocks at market-cap weighting.)
Smart. Up until about 9 months ago I would have suggested investing in renewable energy names directly as well, but they are all seeing massive fund flows recently and look very stretched at the moment, while the fossil fuels are looking cheap.
Actually, we do have an infinite source of relatively cheap energy — a giant fusion reactor in the sky.
Personally, I would stay away from any fossil fuels stock, just because renewable energy and storage are getting cheaper by the day. I think their days are now numbered. I used to have some BP stock but sold it a few years ago.
Your grand-aunt’s mailbox money is called Stealth Wealth.
I’ve known a woman in 90s who’s a school teacher never made more than $24,000/year in salary but has over 40 dividend paying stocks now spinning out over 1 million “mailbox money” a year.
you hear it right, a million per year. She never sells shares. Why kill the goose that lays golden eggs?
no index funds to rebalance or sell to take out 4%…etc.
I don’t think your dividend growth calculation took into account the four 2-for-1 stock splits since 1980 (06/12/1981, 09/15/1987, 4/14/1997, and 07/19/2001). So that 8.45¢ dividend in 1980 is now really worth $3.48 (not just 87¢)!