Is XLE Energy Sector ETF A Buy?

🌟🌟🌟Oil prices rose after President Donald Trump announced a 25% US tariffs on any country buying Venezuelan oil.  The news helped Brent spot oil prices break above USD 73/bbl, settling at its highest since late February.  XLE $Energy Select Sector SPDR Fund(XLE)$  is up 1.8% in the past 5 days a d has risen 7.5% year todate.  XLE represents the best and strongest US Energy Giants in just 1 trade within the S&P500 universe.

The Top 10 holdings include Exxon Mobil, Chevron Corp, Conoco Phillips, Williams Corporation, EOG Resources, ONEOK Inc, Schlumberger Ltd, Kinder Morgan Inc, Phillips 66, Marathon Petroleum and Baker Hughes. 

The Top 10 holdings weightage is 74%.  Total number of holdings is 24.  The expense ratio is 0.09% which is among the lowest among competing ETFs.  XLE is largest Energy ETF and the oldest with Assets Under Management of USD 32.86 billion.

Dividends are paid every 3 months.  The current dividend yield is 2.31%.  XLE just went ex dividend on March 24 2025.  The next dividend is due in June 2025.

$Exxon Mobil(XOM)$  is the largest US based oil and gas company and the largest investor owned oil company in the world.  Exxon has reported an excellent Q4 24 earnings in January that exceeded expectations.  This was due to stellar production from Guyana and Permian, contributing to a strong business outlook.  In May 2024, Exxon completed the acquisition of Pioneer Natural Resources.  With 1.4 million net acres of combined company in the Delaware and Midland basins, having an estimated 16 billion barrels of oil equivalent resource, Exxon has greatly increased its upstream portfolio.

Exxon reported earnings of USD 1.72 billion or earnings  per share of USD 1.69 which beats Zacks Consensus Estimate of USD 1.55.  Cash flow from operating activities was USD 12.2 billion and free cash flow was USD 8 billion.  For the full year 2024, Exxon earnings reached USD 34 billion, its 3rd highest in a decade.

$Chevron(CVX)$  is the 2nd largest US Oil company after Exxon Mobil.    In January, Chevron reported earnings of USD 3.2 billion or USD 1.84 per share for Q4 24 compared with USD 2.3 billion or USD 1.22 per share in the previous year quarter.  In 2024, Chevron delivered record production with  worldwide and US net oil equivalent production increasing 7 and 19% respectively from 2023.

Chevron returned a record USD 27 billion of cash to shareholders during the year.  This include share repurchases of USD 15.2 billion and dividends of USD 11.8 billion.  Chevron also increased its quarterly dividends by 5% to USD 1.71 per share to shareholders.

Warren Buffett owns shares of Chevron worth USD 19.6 billion.  That is 7.5% of Berkshire Hathaway equity portfolio.

Exxon Mobil represents 22.9% weightage of XLE while Chevron's weightage is 16.1%.  Together both Exxon Mobil and Chevron represents 39% weightage of XLE.

The current Trump administration is also pro US Oil and gas.  Trump's famous mantra is "We will drill, baby, drill".  Trump said that America has more liquid gold than any country in the world.  In fact US has been the largest oil producer in the world for the past 6 years, surpassing Saudi Arabia and Russia in production.

With current ban on Russian oil by US and its allies still in place and the latest tariff on Venezuelan oil, the US Energy Giants will stand to benefit. 

Wall Street Analysts are also bullish on XLE with an average price target of USD 106.22.  That is an upside potential of 14%.  This is according to 24 analysts surveyed by Tipranks.

I have invested in XLE before the Ukraine war and since then it has rewarded me with nice, juicy dividends as well as capital appreciation.   That is my favourite way of investing. 

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