It isn’t easy to find yield these days. With rates so low and governments experimenting with negative interest rates, investors are struggling to find places to park their money.
The investments that pay a high-yield unfortunately bring about a great deal of risk. Whether its low grade corporate junk bonds or government bonds from a country deeply in debt, yield is there if you want it. However, the chance of default on these types of investments are higher then what most are used to.
In some cases oil stocks can pay very high yielding dividends. This allows investors to potentially profit two different ways. First, with the dividend and second with capital appreciation if the stock heads higher.
Because of the oil glut and subsequent crude oil crash over the last year many dividend paying oil stocks have been sold in anticipation that the company would cut the payout and even go bankrupt. Now that oil has bounced to $45 a barrel, some of these companies are looking attractive again and the yield they pay is very tempting.
The stocks below are all Zacks Ranked #1 or #2 and pay a dividend of over 10%. This payout lets investors wait out the oil recovery and get paid for it.
However, typically there is a reason a company has a high-yield like these stocks do and usually the reason isn’t good. The first sign of trouble is if the company cuts the dividend, if some cases the stock should be sold immediately as the idea for buying the stock is no longer there.
Oil Stocks with High Paying Dividends: DHT Holdings Inc (DHT)
DHT Holdings Inc (DHT) is a Zacks Rank #1 (Strong Buy) that is engaged in the refining of petroleum primarily in the United States. The Bermuda based company has a fleet that consists of 20 oil tankers including 17 very large crude carriers.
DHT has a market cap of almost $500 million, a forward PE of 4.6 and pays a dividend of 14.63%. The low valuation gives the stock a Zacks Style Score of “A” in Value. The company reports earnings for Q1 on May 2nd where investors will no doubt focus on the back half of the year.
Fiscal 2016 and 2017 have both seen estimate revisions tick higher. Over the last month, estimates have gone from $1.05 to $1.25 per share, a jump of 19%. The price of oil during the remainder of the year will affect the 2016 earnings results and the stock price going forward.
The company has beaten on EPS six out of the last eight times. Another beat will no doubt support the stock, but also maintain the hefty double digit dividend.
Oil Stocks with High Paying Dividends: Vanguard Natural Resources, LLC (VNR)
Vanguard Natural Resources, LLC (VNR) is a Zacks Rank #1 (Strong Buy) that is an independent natural gas and oil company, focused on the acquisition, exploitation and development of natural gas and oil properties. Vanguard’s assets consist primarily of producing and non-producing natural gas reserves located in the southern portion of the Appalachian Basin, primarily in southeast Kentucky and northeast Tennessee. The Houston based company was founded in 2006.
Vanguard has a market cap of almost $225 million, a forward PE of 7 and pays a dividend of 20.69%. The low valuation is in place because of low oil natural gas and oil as it leads to lower margins and profits. Because of this the stock sports a Zacks Style Score of “A” in Value. The stock also has Style Score of “B” in Growth and “B” in Momentum.
After year of missing EPS, the stock finllly broke after energy prices collapsed. Investors have left the stock for dead until last quarter, when the company beat on EPS by 226% in Q4. Estimates for 2016 make the story even more interesting, as recent revisions over the last 60 days have shot higher, from 7 cents per share to 27 cents per share, a jump of 285%.
Oil Stocks with High Paying Dividends: Transocean Partners LLC (RIGP)
Transocean Partners LLC (RIGP) is a Zacks Rank #1 (Strong Buy) that operates and acquires modern, technologically advanced offshore drilling rigs. The U.K. based company drills for oil and gas in the Gulf of Mexico.
Transocean has a market cap of almost $500 million, a forward PE of 6 and pays a dividend of 12.27%. The stock sports a Zacks Style Score of “A” in Value and has a 3-5 year EPS growth rate of 13%.
The company reports May 6th and recent revisions higher might suggest a beat for the company. Over the last month, estimates for the current quarter have jumped 18% higher, from 44 cents per share to 52 cents per share. For fiscal year 2016, revision have been taken 16.5% higher over the same timeframe.
Oil Stocks with High Paying Dividends: NGL Energy Partners LP (NGL)
NGL Energy Partners LP (NGL) is a Zacks Rank #2 (Buy) that is a limited partnership operating a vertically-integrated propane business with three operating segments: retail propane; wholesale supply and marketing; and midstream. The Tulsa, Oklahoma based company was founded in 1940.
NGL has a market cap of almost $1.3 billion, a forward PE of 14 and pays a dividend of 20.03%. The stock sports a Zacks Style Score of “A” in Value “B” in Growth and “A” in Momentum.
On April 21st the company cut its dividend and provided EBITDA guidance for the full year, while announcing an investment from Oaktree Capital. Normally a dividend cut would cause the stock to react negatively, but in this case it surged higher on the Oaktree news. Investors rewarded the company in its efforts to restructure and shares shot over 50% higher before pulling back.
Oil Stocks with High Paying Dividends: CVR Refining LP (CVRR)
CVR Refining (CVRR) is a Zacks Rank #1 (Strong Buy) that operates a fleet of double-hull crude oil tankers on international routes. The Sugar Land, Texas based company also controls and operates logistics assets, including approximately 336 miles of owned and leased pipelines.
CVR has a market cap of almost $2 billion, a forward PE of 7.4 and pays a dividend of 23.46%. The low valuation is in place because of low oil prices and the low margins the company is seeing. The stock sports a Zacks Style Score of “A” in Value. However, the stock sports a Style Score of “D” in Growth and “F” in Momentum as the oil glut has hurt growth prospects.
The company reported Q1 earnings last week and saw an 11 cents per share beat. While estimates for the next couple quarters seem to be ticking upwards, fiscal year 2016 and 2017 are still under pressure. This could all change if oil continues to tick higher improving margins and cash flow.
Oil Stocks With High Dividends In Summary
Beating or maintaining EPS estimates is important for these dividend payers. These companies need to show they can maintain payment of the dividend over the long-term in order to keep investors interested. While oil recovers, the stocks will appreciate higher, allowing investors collect a nice double digit income.
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