Still, it’s hard to ignore that ExxonMobil has been choking amid the mostly strong market conditions of the past decade. Shares trading for more than $100 six years ago sell for less than $50 today.
Even factoring dividends and total return into the picture, ExxonMobil has badly lagged the Dow; the annualized average spread is more than 20 percentage points.
That said, if history is a precursor, being dumped by the Dow is good news for Exxon-Mobil shareholders. Several studies have shown that issues kicked out of the major indices outperform the stocks that replace them.
The last time three stocks were swapped out of the Dow was when Bank of America, Hewlett-Packard and Alcoa were dropped for Goldman Sachs, Visa and Nike. While the replacements had nice gains in their first year in the Dow, the vanquished stocks were rock stars; BofA gained 18%, HP jumped 72% and Alcoa skyrocketed 91%.
Some of that is to be expected; generally, stocks being dumped have been, well, in the dumps. Business cycles being what they are, a rebound isn’t a surprise.
The potential for a rebound would be a reason to hang on.
So, too, would the dividend payout, since the income is a big reason to hold a blue-chip when the chips are down. Honestly, that has been my primary motivation in sticking with Exxon-Mobil, focusing more on the cash flow and the total return than the current share price.