Oil prices have been heavily beaten down over the past few years, leaving stocks in that sector badly bruised.
However, in recent months many oil and gas stocks have begun to recover as the industry moved toward stability.
Oil stocks are still a bit of a gamble as a worldwide supply glut is likely to keep prices from spiking any time soon, but most are expecting to see things improve in the long term. The turbulence in the industry has given investors a chance to see which oil stocks are worth buying by looking for the companies that have made it through the difficult period without much damage.
Three stocks that have proven their worth in the oil and gas space are Occidental Petroleum Corporation (OXY), Royal Dutch Shell Plc (ADR) (RDS.A) and Total SA (ADR) (TOT).
These companies offer investors good long-term growth potential, and their ability to weather the storm over the past few years suggests that they are well-managed companies that will prosper when the space turns around.
Oil Stocks to Buy: Occidental Petroleum Corporation (OXY)
Dividend Yield: 4.1%
As an independent exploration and production company, OXY is one of the riskier bets on this list. However, as the largest independent exploration firm out there, it gives investors an opportunity to invest outside of the oil majors but mitigate some of the risk associated with smaller independent firms.
OXY also boasts a strong balance sheet with relatively low debt compared to its peers. OXY’s debt to equity ratio is just 36.06 percent and the firm finished the second quarter or this year with $3.2 billion worth of cash on the books.
That financial stability is what kept OXY from having to make any drastic cuts during the downturn, so now the company is well positioned to benefit from improving market conditions. Not only that, but OXY investors enjoy a 4.1% dividend yield.
Oil Stocks to Buy: Royal Dutch Shell Plc (ADR) (RDS.A)
Yield: 7.5%
There are many reasons to invest in RDS.A, but the firm’s 7.5% dividend yield is chief among them. The company’s dividend is one of the highest on the market, and that makes for a pretty compelling reason to invest.
RDS.A has struggled recently, with shares down more than 20% over the past three years. The firm’s debt load is hefty and the company’s most recent earnings report left something to be desired, but the European oil major has a lot of growth potential.
The firm recently bought BG Group, which CEO Ben Van Beurden says will translate into $4.5 billion worth of savings by 2018.
Oil Stocks to Buy: Total SA (ADR) (TOT)
Yield: 5.7%
French energy major Total SA is another good choice, as the company’s size has given it some insulation from the drop in oil prices. TOT shares only lost about 3% when the industry took a nosedive, and that was thanks in large part to the firm’s extremely diversified businesses.
Total CEO Patrick Pouyanne has said he will continue to invest in new energy projects despite the dip in energy prices, a risky decision, but one that has the potential to pay off big time once the industry stabilizes.
Traders who are willing to wait for TOT’s future to brighten are well rewarded with a competitive dividend payment. The firm offers an impressive 5.7% dividend yield that investors can rely on, as the firm has not lowered its dividend payout in more than 10 years.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
