The reason for that is because of high capital spending requirements. The truth is many E&P firms, oil service stocks and other companies in the energy sector often don’t have that much left in the kitty to pay back to shareholders via dividends after they shell out billions searching for new sources of production. It’s getting very expensive to frack a well or drill in ultra-deepwater.
Case in point: The Energy SPDR (XLE) — the broad-based exchange-traded fund covering the energy sector — yields only 1.8%.
While long-term price appreciation is great for a portfolio, investors wanting income from the energy patch are often left out in the cold … that is, unless they know where to look.
And we’re not just talking about the major integrated firms, either. There are plenty of choices for income inside the energy sector, but you might have to look across some relatively unfamiliar names.
Here are five of the best, arranged by yield: