Exxon (XOM) reported fourth-quarter results Tuesday that failed to impress. Earnings expanded a modest 2%, to $9.4 billion in the quarter, while diluted earnings per share grew 6%, to $1.97, bolstered by share buybacks during the period. We are sticking with our $78 per share fair value estimate for Exxon and continue to watch its dividend for an opportune time to capitalize on its yield ($1.88 per share annual payout; 2.2% annual yield). For the full-year 2011, earnings jumped 35% as a result of higher crude oil prices, improved refining and chemical margins, as well as gains on sales of assets. Exxon continues to feel the pinch from lower natural gas prices, however. Still, the oil-and-gas giant pulled in roughly $29.7 billion in free cash flow ($66.5 billion in cash from operations less $36.8 billion in capital and exploration expenditures) during 2011, an astounding level. Given the higher annual dividend yields (3%+) offered by Chevron (CVX) and ConocoPhillips (COP), we’re not overly compelled to open a position in Exxon in our Dividend Growth portfolio at this time.
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