Energy stocks have been easy to invest in for the last two years. At the onset of the pandemic in 2020, energy stocks cratered because of a historic decline in demand. However, the U.S. economy began to open in early 2021 and demand increased.
Just as that demand was increasing, the Biden administration took measures to slow down domestic supply. This created the perfect storm for traditional oil and gas stocks on one hand and renewable energy stocks on the other. The storm is likely to continue to blow through the market in 2022.
Demand should remain high even with uncertainty about the virus. With inflation likely to remain high for the first half of the year, many investors will be looking to energy stocks for a reliable dividend.
That doesn’t mean you can simply close your eyes and throw a dart at the energy sector, but it does mean that there’s an opportunity to buy some of the best-in-class stocks in both traditional and alternative energy companies.
Here are seven energy stocks that can give your portfolio an all-of-the-above approach:
- Marathon Petroleum (NYSE:MPC)
- Chevron (NYSE:CVX)
- NextEra Energy (NYSE:NEE)
- Enterprise Product Partners (NYSE:EPD)
- Enphase (NASDAQ:ENPH)
- Brookfield Renewable Partners (NYSE:BEP)
- ChargePoint (NYSE:CHPT)
Marathon Petroleum (MPC)
As traditional oil and gas stocks go, you could do worse than investing in Marathon Petroleum.
As 2021 kicked off, MPC stock was down nearly 30%. However, investors were already starting to see signs of a recovery. That’s because it was around that time that the first Covid-19 vaccines were being delivered.
If you bought the stock at that time, you were rewarded with a gain of nearly 56%. Should investors expect that kind of return in 2022? That would seem unlikely. But oil prices are likely to remain high and analysts give the stock a gain of 13% in the next 12 months.
Marathon pays a quarterly dividend that currently has a yield of 3.68% with a three-year average dividend growth of over 26%. The company has increased its dividend in each of the last nine years.
If you believe that a “both/and” approach will be required as a bridge to a cleaner energy future, then Chevron should definitely be in your consideration set.
CVX stock is up 40% in the last 12 months, but that has analysts concerned that it may be near its peak. However, opportunistic investors may want to look at any dip as an opportunity to buy shares of this best-in-class oil and gas stock.
Chevron CEO Mike Wirth gave an interview to Barron’s Streetwise this summer in which he predicted that oil and gas prices will remain high for the foreseeable future.
Chevron is also making strategic investments in renewable energy, particularly renewable natural gas, renewable diesel and sustainable aviation fuel.
Although the company has no plans to market wind or solar, it is investing in hydrogen and carbon capture as long-term opportunities.
Chevron is a Dividend Aristocrat having increased its dividend in each of the last 34 years.
NextEra Energy (NEE)
There’s no reason to believe that clean energy is going to become less important. That alone is a reason to invest in NextEra Energy.
However, when it comes to investing in energy stocks, location matters. That’s another good reason to buy NextEra Energy stock. The company is based in Florida and has over 11 million residential customers that help the company generate over $16 billion in annual revenue.
With a stock that’s up nearly 25% in the last 12 months, it may be fair for investors to wonder if NextEra Energy is overvalued. One thing to consider is what analysts have to say and at this time, analysts still give NEE stock a buy rating.
With NextEra Energy you also get one of the most reliable dividend stocks you can own. The company is a dividend aristocrat that has increased its dividend in each of the last 27 years. With three-year dividend growth of 38%, this is a strong performing dividend stock as well.
Enterprise Product Partners (EPD)
Dividend yield can be a misleading reason to buy a stock. But when you combine the possibility of a dividend yield of over 8% with a stock in a red-hot sector, you have a powerful combination.
That’s what you get with Enterprise Product Partners.
However, that’s not the only reason to buy EPD stock. The company boasts one of the largest scales and sizes in the industry. And this has resulted in the company having a steady and growing, distributable cash flow.
This, in turn, fuels the dividend growth which the company has increased for the last 23 years. investors can still count on a little growth because of the company’s leadership in the sector.
Analysts are giving a 12-month price target of $27.67, a nearly 26% upside from the stock’s price as 2022 kicks off.
Enphase addresses a key limitation of solar power. Specifically, the company’s microinverter technology converts direct current power from solar panels to alternating current power.
This allows efficient use of solar energy in the evening and on cloudy days. Another benefit of microinverter technology is that it reduces the possibility of a single point failure taking down an entire solar panel system.
The company recently announced the launch of its IQ8 solar microinverters that makes them the first in the industry to provide a solution to power essential appliances during daytime solar panel outages even without a home battery.
Furthermore, while Enphase generates over 80% of its revenue in the United States, it’s looking to expand internationally. One product, Ensemble-in-a-Box, is an infrastructure-light solution that is ideal for countries like India.
As of this writing, ENPH stock is trading 54% its 52-week high. However, analysts give the stock a $244.78 price target that represents a 34% upside from its current price.
Brookfield Renewable Partners (BEP)
For investors looking for a pure-play stock in renewable energy systems, Brookfield Renewable Partners is worthy of consideration.
To begin with, Brookfield Renewable is one of the world’s largest publicly traded renewable power platforms.
The company has a portfolio made up of nearly $58 billion assets under management in hydroelectric, wind, solar and storage projects spread over four continents.
BEP stock is trading near its 52-week low which puts this dividend stock at an attractive price point for value-seeking investors.
After cutting its dividend in 2020 in response to the pandemic, Brookfield increased its dividend in 2021. The dividend yield of 3.41% is slightly below the sector average, but it’s higher than the average of companies that trade on the New York Stock Exchange.
BEP stock is a favorite of analysts who give it a consensus price target of $44.42 which would be 24% higher than the current stock price.
ChargePoint has been a polarizing stock in 2021. In fact, down 51% for the year, CHPT stock could easily take the crown of one of 2021’s biggest losers.
Some of this bearish sentiment has to do with the company being lumped in with the electric vehicle (EV) sector. Some of it has to do with the delay in the U.S. Congress passing the infrastructure bill that has money set aside for building out a charging station infrastructure.
However, ChargePoint is an investment in “when” not “if.” If electric vehicles are going to become a mainstream alternative, a nationwide charging infrastructure will be a must.
This is a crowded sector, but ChargePoint is among the leaders and is adapting its product line to provide solutions for battery packs that will allow consumers to charge wherever they are at (e.g. grocery store parking lots, entertainment venues, etc.).
CHPT stock is trading near its 52-week low and analysts project a 64% upside for the stock.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.