3 High-Dividend Energy Stocks to Buy Now

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Energy stocks have not fared well in 2014, and the sector’s performance has actually worsened as the year progressed. With oil prices over $100 per barrel as recently as late June, the fossil fuel’s precipitous decline hit as low as $53.94 last week.

best dividend stocksIn six months, oil prices had tumbled 47% as a global supply glut, concerns over the strength of global demand, and OPEC’s stubborn refusal to cut production sent crude lower. In fact, considering the various market pressures it’s facing, oil still threatens to dip below $50 per barrel before rebounding.

Energy stocks have been punished by Wall Street in the wake of crude’s swift demise. Rig operator Transocean Ltd (RIG) has seen its stock fall 60% in 2014, while oil and natural gas company Denbury Resources Inc. (DNR) is off 49% this year.

While both of those companies pay hefty dividends, the sustainability of their dividend payments is tenuous at best. The opportunistic income investor, hunting for high-yielding dividend stocks to buy, would be well served to turn to the beaten-down energy sector, where quality dividend stocks are selling on the cheap.

Without further ado — here are 3 high-dividend energy stocks to buy now.

(Note: All yields and returns are through 12/24/14)

High-Dividend Energy Stocks to Buy Now, #1: Exxon Mobil Corporation (XOM)

3 high dividend energy stocks to buy now exxon xom stockXOM Dividend Yield: 2.9%
XOM Stock 2014 Return: -6.5%

Just like the rest of its peers in the energy sector, Exxon Mobil Corporation (XOM) stock has been in the dumps lately. XOM stock’s 6.5% losses this year don’t sound too debilitating, but with the broader market enjoying solid gains, XOM trails the S&P 500 by nearly 20 percentage points.

Conservative investors, understandably wary of jumping onto the sinking ship that is the energy sector, can sleep a little easier with Exxon stock in their portfolio. While stocks like RIG and DNR are highly exposed to fluctuating oil prices, Exxon is nicely hedged. With both upstream (oil and gas exploration, drilling, and production) and downstream (refining and distribution) operations to its name, XOM enjoys a boost from its refining operations when oil prices slide.

The Wall Street Journal‘s Justin Scheck explains why:

“That is because the downstream operations, which refine oil into gasoline and other products, become more profitable when the oil they use is cheaper. Prices of refined products such as gasoline typically don’t fall as quickly as those for crude.”

So XOM, as an integrated oil and gas company, is naturally less volatile than an oil rig business like Transocean. And with a 2.9% annual dividend and a 31-year history of dividend growth, XOM is definitely one of the best dividend-paying energy stocks to buy now.

High-Dividend Energy Stocks to Buy Now, #2: Chevron Corporation (CVX)

3 high dividend energy stocks to buy now chevron cvx stockCVX Dividend Yield: 3.8%
CVX Stock 2014 Return: -8.8%

Chevron Corporation (CVX) enjoys many of the same structural benefits as Exxon. Also an integrated oil and gas behemoth, the $215 billion company won’t be going under anytime soon.

Opportunistic income investors should be frothing at the mouth over CVX stock, which is trading 16% off the all-time high CVX set back in July. At a P/E ratio of just 10.5, Chevron trades well below the S&P 500’s 19.5 multiple and the Dow Jones Industrial Average‘s 16.8 P/E ratio.

Not only that, but Chevron’s hefty 3.8% dividend yield has the Dow and S&P easily beat, too. CVX stock’s 3.8% dividend yield is double the 1.9% dividend yield on the S&P 500, and lightyears away from the 2.2% the blue-chip darlings of the Dow dish out.

Chevron hiked its dividend by 7% in 2014, marking the 28th straight year CVX has boosted its dividend payment. Regardless of where oil prices go in the near-term, this high-dividend energy stock is a strong buy right now.

High-Dividend Energy Stocks to Buy Now, #3: ConocoPhillips (COP)

3 high dividend energy stocks to buy now conocophillips cop stockCOP Dividend Yield: 4.1%
COP Stock 2014 Return: +0.5%

Straight out of Houston, Texas, ConocoPhillips (COP) is another high-dividend energy stock to buy now. Its 4.1% annual yield is the best on today’s list, and if history is any indication, COP will be a formidable dividend stock for years to come.

Despite keeping a 66-cent quarterly dividend in place throughout all of 2011 and 2012, ConocoPhillips has a 15.7% dividend growth rate over the last 10 years, and hiked the COP dividend in both 2013 and 2014.

While ConocoPhillips will face some headwinds if energy prices remain low for a pronounced period of time, COP stock could soar if billionaire energy magnate T. Boone Pickens’ prediction is accurate. Pickens, who made his early fortune by founding his own oil company, believes that:

“Domestic oil producers have ‘overdrilled’ in the U.S., and that as a glut of supply continues to flood the markets, American drillers will reduce production, sending oil prices higher.”

Speaking on the months-long bear market in crude oil, he added:

“I can see this lasting through year end. But in the first quarter of next year I think we hit the low and then I expect prices to recover.”

As always, there’s no telling when oil will rally higher, how high it will go, or how quickly. But with COP stock yielding 4.1% and trading at 12.2 times earnings, ConocoPhillips is a compelling high-dividend energy stock to buy now, while the opportunity still exists.

John Divine is an Assistant Editor at InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/12/high-dividend-energy-stocks/.

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