Comparing Optimal Oil Stocks: Devon Energy versus ExxonMobil
In recent months, West Texas Intermediate crude prices have seen a rollercoaster ride, with a 15% surge followed by a return to near-4% gains. This volatility is common in the energy sector, making it tricky to decide between potential oil stock investments like ExxonMobil (XOM) and Devon Energy (DVN). Let's explore the differences between these two companies to help you choose the one that suits your investment approach best.
Exxon vs. Devon: A Closer Look
Devon Energy is an upstream company, meaning it focuses on oil and natural gas production, and primarily operates within the U.S. market. Its financial results can be heavily dependent on fluctuations in energy prices, with no other divisions to balance the impacts.
ExxonMobil, on the other hand, also operates in the upstream, but its business model includes midstream (energy transportation assets like pipelines) and downstream (chemical and refining operations) sectors. These divisions can help buffer the impact of energy price volatility, making ExxonMobil's financial performance less extreme than that of a pure-play energy company like Devon.
Picking Your Preferred Oil Stock
Different investors have diverse requirements and investing styles, and ExxonMobil and Devon Energy cater to these preferences in various ways.
ExxonMobil: A Conservative's Pick
Investors seeking stability, conservative risk management, and a dependable income source will likely appreciate ExxonMobil. Its diversified business model, strong balance sheet, and impressive 42-year streak of annual dividend increases make it an attractive option for those focused on income generation. While the current dividend yield of 3.5% may not be the highest historically, it is still significantly higher than the market average of 1.2%.
Devon Energy: For Aggressive Investors
Devon Energy may be a more appealing choice for investors with a constructive view on energy prices and a higher tolerance for volatility. Its pure-play upstream focus allows it to directly benefit from spikes in commodity prices, while its strong financial results, large land inventory, and consistent dividend payments demonstrate its solid business operations.
However, potential investors should be mindful of its variable dividend policy, which has been influenced by energy price swings and acquisition-driven growth strategies, leading to periods of higher payouts and leaner dividend periods.
ExxonMobil or Devon Energy: The Final Decision
The choice between ExxonMobil and Devon Energy ultimately depends on your investment goals and risk tolerance. ExxonMobil's diversified business model, extensive operations, and dependable income source cater to conservative investors. In contrast, Devon Energy's pure-play approach can provide aggressive investors with substantial exposure to commodity price fluctuations.
By considering your personal investment preferences, you can make an informed decision between these two oil stock investment opportunities.
The volatility in West Texas Intermediate crude prices, influenced by factors like the coronavirus, can impact the performance of oil stock investments like ExxonMobil and Devon Energy. Devon Energy, with its focus on upstream oil and natural gas production, can be heavily influenced by energy price fluctuations, making its financial results variable. In contrast, ExxonMobil's diversified business model, including upstream, midstream, and downstream sectors, can help buffer its financial performance during times of energy price volatility.
For investors seeking stability and a dependable income source, ExxonMobil's diversified business model, strong balance sheet, and impressive track record of annual dividend increases make it an attractive option. On the other hand, Devon Energy's pure-play upstream focus and direct exposure to commodity price spikes may appeal to investors with a constructive view on energy prices and a higher tolerance for volatility.
Investors must consider their risk tolerance and investment goals before deciding between ExxonMobil and Devon Energy, as the choice between these two oil stocks can significantly impact their investment portfolio's performance.
