The removal of Exxon Mobil Corp. from the Dow Jones Industrial Average may be a classic contrary signpost for the downtrodden oil and gas equity sector.
The only energy company left in the index is Chevron Corp., with a 2.1 per cent share. That about matches the 2.5 per cent share in the S&P 500 (from 12 per cent less than a decade ago). Last I saw, energy goods and services accounted for 6.2 per cent of the consumption bucket, 7.8 per cent of manufacturing shipments and about 10 per cent of profits.
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But as we re-enter a period of ‘ZIRP’ (zero interest rate policy) from the U.S. Federal Reserve — with no intentions of raising rates, or thinking about thinking about raising rates (as Fed chairman Jerome Powell put it) — investors are yet again forced to identify where they can get an income stream. In the period following the Great Financial Crisis, the answer has been in the stock market with the dividend yield exceeding the yield on the 10-year Treasury note on multiple occasions.