Whether it’s September, October or any other month, the game is always the same. Identify undervalued stocks, put your capital to work and reap the rewards of your patience as they increase in value at some later point. This month, as in any other, there are deals to be had with undervalued energy stocks.
All of the firms discussed include dividends. Thus, those who invest now in anticipation of price increases will get the immediate benefit of dividend income. That said, let’s take a deeper dive into said undervalued energy stocks.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) is an energy stock in the sense that it provides energy. It is not a traditional energy stock in that it doesn’t sell oil. The company operates an electric utilities firm in Florida and another business segment focused on solar and wind power generation.
Each of those is the largest among its competitors. Florida Power & Light is the largest U.S. electric utility while NextEra Energy Resources is the world’s largest generator of solar and wind power.
In fact, NextEra Energy Resources has become the larger contributor to the firm’s overall revenues. That’s a testament to the value of renewable energy and to NextEra Energy as an investment. The company continues to grow based on both top and bottom-line results.
Buy NEE stock because it is undervalued, includes a dividend yielding 2.8% and has built an enviable and diversified business overall. The company is future-proofing itself and combines the stability of a utilities firm with dividends and the growth of the renewables sector. It’s a win-win situation.
Schlumberger (NYSE:SLB) continues to offer upside to investors and remains highly regarded by Wall Street. That combination of factors is almost always positive. The company is an exploration and production firm (E&P) but is more aligned with the services side than the actual business of drilling itself.
As with any E&P firm, Schlumberger benefits as prices rise and firms get into the field to extract that oil. The company then has much more fertile ground into which it can sell its services. Schlumberger’s earnings were pretty much right where Wall Street expected. Revenues rose by 20% while EPS increased by 44% year-over-year.
The sector is marked by a positive outlook moving into 2024. International activity and offshore activity are both expected to continue to strengthen with large firms like Schlumberger expected to benefit. The company also recently increased its dividend. That’s good for income investors and a positive sign overall.
ConocoPhillips (NYSE:COP) is also an exploration and production firm within the energy sector. It is perhaps more accurately described as an Oil Major and although pumping oil is its bread and butter, it touches the entire value chain.
Like just about every other oil E&P, ConocoPhillips is dealing with the hangover that is 2023. Prices for a barrel of oil were much lower during Q2 2023 compared to Q2 2022. ConocoPhillips’ EPS more than halved as a result, falling to $1.84. That may sound discouraging but Oil Majors have pretty well built these factors into their business models. It hasn’t correlated to a halving of share prices, not even close. Nor is there any expectation of that occurring.
The company has raised dividends and increased share buyback authority. It’s all about rewarding the investor in the good times and the bad while continuing to explore for more oil. ConocoPhillips has been one of the best at doing exactly that and will continue to be among the best moving forward.
On the date of publication, Alex Sirois 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.