Here’s where to look for income from energy stocks.
Last year was full of fireworks for the energy sector. Crude oil slumped nearly 20 percent in January 2017; then prices reversed across the second half as OPEC output cuts finally had an impact. More recently, a “risk premium” followed protests in Iran and other geopolitical tensions. These factors pushed oil up to the highest levels since mid-2015 and many energy stocks have been on the upswing. But for income-oriented investors, it’s important to differentiate between short-lived trades and those that keep paying you over time. In the interest of long-term performance, here are seven high-dividend energy stocks for those looking for more than just a swing trade on oil’s recovery.
Oneok (NYSE: OKE)
Higher energy prices have been good for Oneok, but so has the recent cold snap. As a midstream natural gas company, Oneok helps store, process and transport natural gas, which sees increased demand in chilly weather. As a massive energy infrastructure company, it’s difficult to imagine big year-over-year jumps in profits going forward. Rather, as a middleman, OKE helps move natural gas around the U.S. economy. On the plus side, this model is very stable — and as a result, can support big and consistent dividends. And with plans to build a $1.4 billion pipeline in the West, Oneok is ensuring its future business is just as reliable.
Current yield: 5.3 percent.
Chevron Corp. (CVX)
One of the biggest oil companies on the planet, Chevron is also one of the most stable and reliable picks in the sector. But don’t think that makes it a sleepy investment that goes nowhere; shares of Chevron are up more than 20 percent in the last six months to handily outperform the broader Standard & Poor’s 500 index. Equally compelling is the generous dividend that has been increased for 29 consecutive years — making it one of Wall Street’s vaunted “dividend aristocrats.” This consistent and growing dividend makes CVX stock a good bet even in tough times. And in an up market for oil, the payouts make it a slam-dunk.
Current Yield: 3.4 percent
Knot Offshore Partners (KNOP)
Knot Offshore is a niche company that is much smaller and thus more aggressive. The company leases tankers to the biggest players in the global energy industry under long-term contracts. These tankers are crucial to moving oil and gas to land-based processing facilities. Knot’s services weren’t in high demand a few years ago when energy prices were crashing and drilling was slowing down. But now, the future is brighter. This $700 million company is riskier, but its small size makes it agile enough to seize opportunities quickly in 2018. The company pays a monthly dividend of 52 cents that is at risk to volatility in oil prices, but incredibly generous if it sticks.
Current yield: 9.5 percent
Statoil (STO)
Normally, investors think of China when they think of big state-run oil companies. However, Statoil is a $70 billion publicly traded oil company that is majority-owned by the Norwegian government. Its operations are mainly in Norwegian offshore fields, but STO stock has grown to have a global presence. And since it’s domiciled in Europe, the company has the same continental commitment to dividends as most stocks in the region. An oil company this size is normally a stable bet, but throw in sovereign ownership and there’s an even bigger case for stability. The future of this company seems secure, and so is its dividend.
Current yield: 4.9 percent
San Juan Basin Royalty Trust (SJT)
This is one of the few royalty trusts left on Wall Street. This investment is unique in that owners don’t have a stake in much of a company. What they really own is a piece of an oil and gas field — and they get a share of the profits as that energy is brought to market. The share price fluctuates as speculators move in and out of this stock, however, so the biggest potential comes from its monthly dividends. Right now, those dividends are in double digits based on the last 12 months of payouts. The risk is that when the field runs dry, so do the dividends. But there’s no risk of that in 2018.
Current Yield: 10.1 percent
Atmos Energy Corp. (ATO)
Atmos is a sprawling natural gas company that has been roughly a century in the making. Starting in the Texas panhandle but expanding steadily — including a flurry of acquisitions since 1980 — the company is now one of the nation’s largest natural gas distributors. Its service area spans more than 1,400 communities and 3 million customers, giving it both scale and diversification across geographies. And thanks to that stable business, the company has been able to increase its dividend annually for 34 years. Shares have softened up a lot in the last month or so, but this dip presents a great buying opportunity for new investors.
Current yield: 2.4 percent
Royal Dutch Shell (RDS.A)
Royal Dutch Shell is an integrated oil giant like Exxon Mobil Corp. (XOM), and is second only to Exxon in market cap on U.S. exchanges. However, it’s not a Standard & Poor’s 500 index component because it’s not domiciled in the U.S. However, RDS is a better pick than Exxon for income because its yield is significantly higher. It’s also noteworthy that while some companies were in big trouble during the oil crash a few years ago, Royal Dutch Shell was actually expanding — making a $53 billion deal for natural gas giant BG Group. This move was well-timed and will provide continued stability for this energy giant.
Current yield: 5.5 percent
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7 Energy Stocks with High-Powered Dividends originally appeared on usnews.com
