Big oil is back.
With crude prices above $90 a barrel and heading higher, energy stocks are hot once again. Oil companies were the only trade that worked during the 2022 bear market. Crude prices peaked above $120 a barrel, leading to gushing profits and record shareholder distributions by all the major players.
Then, the industry seemed to be back in the doldrums in the first half of this year as prices fell below $70 per barrel. However, the price of crude oil increased 25% in the last three months. This came as a result of Russia and Saudi Arabia announcing that they are extending voluntary output cuts through the end of this year.
Suddenly, the boom times are back, and energy companies are again making hay while the sun shines. Investors who missed out on last year’s bull run in energy stocks now get a second kick at the can.
Take advantage of these few standouts, each of which pays generous dividends to its shareholders.
Chevron (CVX)
Chevron (NYSE:CVX) is forecasting that crude oil prices will hit $100 a barrel.
CEO Mike Wirth made the bullish call on crude prices during a recent interview with Bloomberg television. Whether oil prices actually reach $100 per barrel or move higher, Chevron is well-positioned to continue leading in the energy sector. While CVX stock is down 4% this year, the share price has gained 10% since oil prices began rising this past summer.
The current price rise comes as Chevron continues to share the spoils of its record-breaking financial gains in 2022 with shareholders. The company issued a record $7.2 billion of shareholder distributions in Q2 of this year, dividends and stock buybacks combined. Chevron most recently reported Q2 earnings of $6.01 billion.
While that was down 48% from the same period of 2022, it beat Wall Street forecasts that called for a Q2 profit of $5.5 billion. CVX stock is up 38% over the last five years. It also pays a hefty dividend that yields 3.61%.
Pioneer Natural Resources (PXD)
For a really impressive dividend payment, look to Pioneer Natural Resources (NYSE:PXD). The company, which is a major oil producer in both Texas and New Mexico, was one of the first to develop “variable dividend“.
Pioneer pays a base dividend to its shareholders each quarter but also pays an additional variable dividend that is tied to the company’s cash flow. It’s a model designed to reward stockholders when crude oil prices are high, as they were in 2022.
Five years ago, when oil prices were in a slump, Pioneer paid a total dividend for the year of 32 cents a share. But last year, amidst record profits, Pioneer paid its shareholders a dividend of $25.44 per share. The dividend yield in 2022, base and variable combined, exceeded 10%.
With crude prices trending higher once again, PXD stock is definitely one to consider. The company’s share price has risen 6% so far in 2023, with most of that gain coming since crude prices starting rising in late June. Over five years, the stock is up 36%.
Exxon Mobil (XOM)
Energy giant Exxon Mobil (NYSE:XOM) is another oil player that continues to report decent financials. This is in spite of oil prices falling well-below their 2022 peak of $120 per barrel.
True, the Houston-based energy company reported a 56% decline in its Q2 profit due to a retreat in crude prices. Yet, Exxon Mobil still posted its strongest earnings for the April through June period in more than a decade. Admittedly, this was helped by aggressive cost cutting. The company achieved structural cost savings of $8.3 billion from 2019 levels in Q2, near its $9 billion cost-cutting target.
Also, Exxon Mobil has been generous with its shareholders, distributing $8 billion in cash to shareholders during Q2 of this year, including $3.7 billion in dividend payments. The company’s quarterly dividend currently yields 3.10%. XOM’s oil production stands at 3.7 million barrels of oil equivalent per day (BOE/D), in line with its annual target.
Exxon stock has increased 10% this year despite the drop in crude oil prices. Over five years, the company’s share price is also up 38%.
On the date of publication, Joel Baglole 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
